According to a new survey obtained from the Census Bureau—since the pandemic began the share of Americans who “sometimes” or “often” do not have enough to eat has grown by two percentage points, representing some 4m households. An astonishing 20% of African-American households in the US, along with children are now in this precarious position.
By Nazarul Islam
Ever heard someone welcoming a recession? Being through more than one myself, I can bet that the downturns of the cycle are particularly hard to deal with—particularly, when you are poor. Rising unemployment also means rising poverty: the last great recession most of us had experienced during 2007-09 had enhanced the share of Americans classified as poor, on a widely used measure, to jump from 12% to 17%.
I had witnessed vanishing jobs by the million, and saw businesses that had gone bust—en masse! That economic shock, as bad as it was, has paled in comparison to what America is seeing today under the coronavirus pandemic. The jobs report for June published on July 2nd, has revealed that unemployment remained well above the peak, of a decade ago.
Severe deprivation is certainly on the rise. According to a new survey obtained from the Census Bureau—since the pandemic began the share of Americans who “sometimes” or “often” do not have enough to eat has grown by two percentage points, representing some 4m households. An astonishing 20% of African-American households in the US, along with children are now in this precarious position.
Meanwhile, the proportion of Americans saying that they are able to make the rent is falling. More people today are typing “bankrupt” into Google.
Yet these trends, as shocking as they are, do not appear to be part of a generalized rise in poverty. The official data will not be available for some time. A new paper from economists at the University of Chicago and the University of Notre Dame, however, suggests that poverty, as measured on an annual basis, may have actually fallen a bit in April and May, continuing a trend seen in the months before the pandemic hit.
Why? The main reason is that fiscal policy is helping to push poverty down. The stimulus plan passed by Congress is twice the size of the one passed to fight the recession of a decade ago. Much of it, including cheques worth up to $1,200 for a single person and a $600-a-week increase in unemployment insurance (UI) for those out of work, is focused on helping households through the lockdowns.
At the same time, unemployment now looks unlikely to rise to 25% or higher, as some economists had predicted in the early days of the pandemic, thereby exerting less upward pressure on poverty than had been feared.
Let us be mindful that upshot is —the current downturn looks different from previous ones. Household income usually falls during a recession—as it did the last time, pushing up poverty. However, paper in mid-June from Goldman Sachs, a bank, suggests that this year nominal household disposable income will actually increase by about 4%, pretty much in line with its growth rate before the pandemic hit.
The extra $600 in unemployment insurance had ensured in theory, that three-quarters of job losers will earn more on benefits, than they had done in work.
By international standards, America’s unexpected success at reducing poverty nonetheless remains modest. Practically every other rich country has a lower poverty rate. It is also a fragile accomplishment. The extra $600-a-week payments are supposed to expire at the end of July.
Authors of a recent paper from Columbia University have argued that poverty could rise sharply in the second half of the year, a valid concern if unemployment did not decisively fall by then. Goldman’s paper assumed that Congress will extend the extra unemployment insurance, but for the value of the payment to drop to $300. Even then, they expect that the household disposable income would fall next year.
Will the extra stimulus, likely help those at the very bottom of America’s socio-economic ladder—including people not able to buy sufficient food—is another question. Six per cent of adults do not have a current (checking), savings or money-market account, making it difficult for them to receive money from Uncle Sam. Some may have been caught up in the delays which have plagued the UI system, and a small number may be undocumented immigrants not entitled to fiscal help at all.
Many have reported not being able to gain access to shops, presumably closed under lockdowns. A foolproof method to improve the lot of people in such unfortunate positions is an obvious attempt to get the virus under control and jump the economy— firing on all its cylinders, once again.
However, for now, that looks a little too improbable today. Winners in the job market will fail until they succeed. Losers will certainly quit, when they fail.
The Bengal-born writer is a senior educationist and is settled in USA. He writes regularly for Sindh Courier and the newspapers of Bangladesh, India and America.