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New Research Forecasts Increased Poverty Rates During the COVID-19 Crisis

April 20, 2020

As the COVID-19 pandemic spreads across the United States, there is considerable uncertainty about its economic impact. Emerging trends indicate that many who were financially insecure before this public health crisis are at risk for a precipitous decline into poverty. As governments require indefinite closures of schools and non-essential businesses, the number of American workers filing unemployment claims has skyrocketed, with over 20 million newly unemployed in the last month.

Zachary Parolin and RSF grantee Christopher Wimer (Columbia University) have published a new policy brief that suggests how the pandemic might increase poverty levels in the United States. The researchers utilize an innovative method to forecast poverty rates in the United States using the Supplemental Poverty Measure. Their projections demonstrate that if unemployment rates rise to 30 percent, the American poverty rate could increase to 18.9 percent (an increase of 21 million people), the highest recorded poverty rate since 1967. A 30% unemployment rate could also mean that the number of U.S. residents living in deep poverty would rise from around 13 million to 23 million.

Parolin and Wimer’s projections predict poverty rates that could rival those of the Great Recession, with devastating consequences for marginalized and vulnerable populations. The pandemic has already disproportionately impacted African-Americans, who are the racial group most likely to die from COVID-19. Polin and Wimer’s research suggests that poverty rates among African-Americans are likely to rise twice as much as among whites. Children may also be seriously impacted; they are more likely to become poor, which will have a severe negative impact on their life outcomes, including future education, wages, and health. Working-age adults and Latinos could also face substantial increases in their poverty rates.

It is important to note that these estimates do not take into account the potential impact of the CARES Act, which directed cash payments of $1,200 per adult and $500 per child to many American families. In the future, the Center’s poverty rate forecasts will reflect this and other policy interventions. Racial disparities in poverty rates may be even more pronounced than originally predicted if unemployment is unevenly distributed along racial lines.

Christopher Wimer is a co-editor of the RSF book, Children of the Great Recession (2016). The foundation has supported Wimer’s research examining the societal impacts of economic downturns and intergenerational economic mobility.  Zachary Parolin is a postdoctoral research scientist at Columbia University’s Center on Poverty & Social Policy.

Journalist and RSF grant recipient Jason DeParle covered the policy brief in a recent New York Times article. For more detailed information, please read the brief here.

 

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