The pandemic crippling the American economy portends a sharp increase in poverty, to a level that could exceed that of the Great Recession and that may even reach a high for the half-century in which there is comparable data, according to researchers at Columbia University.
The coming wave of hardship is likely to widen racial disparities, with poverty projected to rise twice as much among blacks as among whites. Poverty is also likely to rise disproportionately among children, a special concern because brain science shows that early deprivation can leave lifelong scars. Children raised in poverty on average have worse adult health, lower earnings and higher incarceration rates.
If quarterly unemployment hits 30 percent — as the president of one Federal Reserve Bank predicts — 15.4 percent of Americans will fall into poverty for the year, the Columbia researchers found, even in the unlikely event the economy instantly recovers. That level of poverty would exceed the peak of the Great Recession and add nearly 10 million people to the ranks of the poor.
High unemployment is projected to increase the poverty rate and widen racial disparities.
Poverty rate under different unemployment scenarios (second quarter, April-June)
White
All
Children
Hispanic
Black
Feb. 2020 estimate
10% unemployment
20% unemployment
30% unemployment
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
Share in poverty
Feb. 2020
estimate
Unemployment:
10%
20%
30%
26% in
poverty
24%
22%
20%
Black
Hispanic
18%
16%
14%
Children
All
12%
10%
White
8%
With jobs vanishing at a startling rate — 22 million in the last four weeks — there is great uncertainty about how high unemployment will go or how soon it will drop, but its potential to leave a wake of impoverishment has forecasters worried.
“While there’s a lot we still don’t know, these estimates give us a glimpse of the scope of the poverty problem we may be facing,” said Zachary Parolin of Columbia’s Center on Poverty and Social Policy, who produced the estimates along with Christopher Wimer.
There are significant caveats. Most important, the model does not yet include the potentially large anti-poverty effect of the Cares Act, the emergency legislation last month that provides about $560 billion in direct relief to individuals and even greater sums to sustain businesses and jobs.
However imprecise, the model suggests a coming poverty epoch, rather than an episode. So far, economic forecasts have focused mostly on unemployment, which affects Americans at many income levels, rather than on poverty, a measure of acute distress.
“This exercise is useful, and the results are worrisome,” said Ron Haskins, a conservative poverty expert at the Brookings Institution who helped write the landmark 1990s law reducing access to welfare. “Even if we can’t look at the numbers precisely, they show us we’re going to have a big increase in poverty.”
The researchers use the Census Bureau’s fullest yardstick of poverty, the Supplemental Poverty Measure, which counts cash income, noncash benefits (like food stamps and subsidized housing), and the effect of taxes and refundable credits. It also adjusts for local costs of living.
A family of four renting a home in Phoenix, a city with typical living costs, is considered poor if its income is at or below $28,170 — the federal government’s estimate of what it takes to secure minimally adequate food, clothing and shelter.
Mr. Wimer has done pioneering work on poverty measurement. After the Census Bureau began using the Supplemental measure in 2011, he and his colleagues used government data to create analogous figures back to 1967.
In constructing their current model, he and Mr. Parolin, the lead researcher, used unemployment data to estimate the characteristics of those now losing their jobs, including their age, race, education and living arrangements. Then they used that demographic portrait to predict the idled workers’ chances of becoming poor, based on recent patterns.
Unlike unemployment numbers, which are released monthly, poverty rates are reported with a yearlong lag — too late to guide policymakers in a crisis. The Columbia team plans to begin publishing monthly estimates, possibly as soon as May. “We’re building a model that can be used in real time,” Mr. Wimer said.
Slow to register in government statistics, poor people are also generally the last to benefit from an economic recovery. It took 12 years from the start of the Great Recession for poverty rates to fall to their previous levels.
If the unemployment rate averaged 24 percent for a full year — a pessimistic but conceivable outcome — the share of Americans plunged into poverty would exceed that of any of the 53 years for which there are comparable measures.
If high unemployment persists, poverty levels could be the highest on record this year.
Unemployment scenarios are annual for 2020.
UNEMPLOYMENT:
20%
30%
20%
10%
15%
Feb. 2020
estimate
Poverty rate
10%
5%
1967
1980
2000
2020
20%
30% unemployment
20% unemployment
10% unemployment
15%
Feb. 2020 estimate
Poverty rate
10%
5%
1967
1980
1990
2000
2010
2020
The Cares Act, which the model does not yet take into account, will spend $2 trillion to prop up the economy. It will send most Americans emergency checks ($1,200 per adult and $500 per child) and add $600 a week to unemployment benefits through July. While much of the money will go to people unlikely to fall into outright poverty, its impact on poverty rates is still expected to be substantial.
“It’s unlikely we’ll see poverty numbers as bad as these” in the Columbia model, said Scott Winship, who as executive director of the Joint Economic Committee of Congress works for Senator Mike Lee, a Utah Republican. “This a baseline for how bad things could get if policy didn’t respond. But it’s certainly the case that there will be a lot of hardship experienced — probably more, if I had to guess, than we saw in the Great Recession.”
The researchers will include the Cares Act in future simulations. Among the outstanding questions is whether or how promptly the aid will reach its intended beneficiaries, with many jobless people currently unable to file claims at overwhelmed government offices. “There are so many unknowns at the moment it would be hard to model precisely,” Mr. Parolin said.
Robert Greenstein, president of the Center on Budget and Policy Priorities, a research group that supports anti-poverty spending, said that the Cares Act would lower poverty in the short run, but that the Columbia model pointed to the long-term peril if the crisis endured. “We need to make sure the key provisions don’t expire as long as unemployment stays elevated,” he said.
The Columbia data does underscore the extent to which the safety net reduces poverty. At the start of the pandemic, the poverty rate would have been 25 percent without programs like food stamps and tax credits. That aid lifted 41 million people from poverty and halved the rate, to 12.4 percent.
The pandemic threatens a sharp reversal of fortune for the neediest Americans, who had benefited from the recent years of strong economic growth. Poverty among children, African-Americans and Latinos had fallen to record lows. Still, poverty — and child poverty in particular — remained higher in the United States than in most rich countries, which generally have stronger safety nets.
The phrase “poverty rate” is an anodyne term for a level of deprivation that predicts outcomes as various as stunted physical growth and educational underachievement, and that can turn life into a series of desperate choices, like feeding the children versus paying the rent. An annual unemployment rate of 20 percent would leave 55 million people poor, up from 40 million in February, the model predicts.
“Poverty represents a level of deprivation that many middle- or upper-income Americans can’t even wrap their head around,” said Sarah Halpern-Meekin, a sociologist at the University of Wisconsin who has conducted extensive interviews with poor parents. “The first thing that come to mind is a mother I met who was trying to manage her son’s asthma while living in an apartment that had rodents, insects and mold no matter how much she cleaned. Rising poverty rates means more families living like that.”
A rise in child poverty is especially worrisome, since even a brief spell can have lasting effects.
Poverty “disrupts the structure and function of the developing brain” through mechanisms that include poor nutrition, high stress and exposure to environmental toxins, said Dr. Deborah Frank, a professor at the Boson University School of Medicine. “Even mild deprivation at an early age can have ripples and ripples,” she said. “What we’re talking about here is not only what a mess we’re going to be in next year but the mess we’re going to be in in 20 years.”
Poverty measurement is contentious. While many liberals argue the Supplemental measure underestimates hardship, some conservatives say it exaggerates need because low-income Americans on average significantly underreport their income. The Census Bureau tries to adjust for that, but conservative critics say surveys of the goods and services that the poor consume provide a less worrisome and more accurate measure.
Among them is Bruce D. Meyer, an economist at the University of Chicago. He said that since the Columbia model left out all the benefits of the Cares Act, “I wouldn’t take the numbers seriously.” Still, he added, “You can expect that deprivation at the bottom is going to go up quite dramatically.”
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