The economic conditions preceding the pandemic, aggravated by the likelihood of extended unemployment, could bring the poverty level to 25% or higher, especially for nonwhites. By some projections, from a Columbia University study, the unemployment rate could reach 30% resulting in 15.4% falling into poverty. This is posited as a worst case scenario and the researchers also offer lesser figures dependent on a smaller unemployment rate. In either case, children and people of color are bound to be disproportionately represented in the unemployment figures and in poverty data.
The structure of the American economy has promoted poverty for the less skilled workforce where jobs have been plagued by erratic hours and absent or minimal benefits such as paid sick days, healthcare, and retirement. Many businesses have been reducing work schedules to save money when business is slower. Decreased hours impact a worker’s income and preclude the worker from gaining additional jobs due to scheduling unpredictability. Additionally, “real” wages for lower paid workers have been stagnant while corporate profits have proliferated. Studies show that wages, controlling for inflation and benefits are down 5.4%, or about $3000. Add the high cost of healthcare, daycare, and education and it is apparent that the working class has not shared in the “robust” economy touted by the media and some politicians. Businesses have opted for maximizing profits, rewarding CEOs and shareholders while practicing frugality with respect to labor.
Currently, the poverty rate is the highest it has been in the 50 years of record keeping. The large number of children at risk is particularly worrisome as even small, limited time deprivations can lead to long term dysfunction in the brain. These deficits can be persistently manifested into adulthood. Such circumstances have been shown to result in less earnings, poor health, and higher rates of incarceration.
The CARES Act, a 2 trillion dollar stimulus program recently passed by Congress ,is bringing relief to individuals and businesses, but has run into problems. The one time payments to individuals are of limited import and the Small Business program has already run out of funds (though it looks likely that Congress will authorize additional funding), and has been awarding funds to companies like Ruth Crist’s Steak House which are not small businesses..
The safety net, in the US, has been under attack since the welfare reform of 1996, the most recent cuts (before the pandemic) being in unemployment insurance and federal food programs (SNAP). Last year according to Feeding America, 40 million individuals were served by food banks. Current demands on food banks foretell a much greater number currently. Many Americans cannot afford the premiums for health insurance and are ineligible for Medicaid (earn too much or are in states that chose not to participate in the ACA federal extension). Some of these individuals will now be able to apply for Medicaid as they are unemployed and others will just join the uninsured.
Since 2011 economists have been using the Supplemental Poverty Measure to determine poverty rates. It is more reliable than the traditional federal poverty level formula since it includes cash, noncash benefits, taxes, and income refunds (EITC) as well as the local cost of living in establishing poverty rates. Published poverty rates generally are obsolete, since they are only figured annually (as opposed to unemployment which comes out monthly). Columbia researchers studying poverty are hoping to produce a new estimate in May to reflect emergent poverty rates since the pandemic. In the past month 22 million jobs were lost with 5.2 million of these in the past week. Joseph Stiglitz, Columbia professor and Nobel Prize winning economist, has said that the US possesses no effective safety net. Contrary to popular beliefs many individuals receiving public health subsidies and cash assistance are working so it is not a leap to imagine the selling of these programs with a huge boost in unemployment.
It is not rocket science to figure out what can help the workers. Other countries offer a substantive safety net with sustained wages and healthcare, even during unemployment, and many offer low or free higher education. The American economy must move away from focusing on a quick grab for short term corporate profits and sustain long term health by making livable wages and conditions for its workers. The pandemic has shown, if anything, how essential the labor of our low paid service and agricultural workers is. Policies which worked only for the wealthy may not be sustainable in the “new post pandemic economy”. If corporations persist in short term gains for their shareholders, while workers suffer unemployment and ill health, the current levels of government support will not be sufficient and ultimately costs for disease, malnutrition, crime, and other related consequences will drain the government budgets. A best case scenario resulting from the pandemic would be a rethinking and restructuring of economic policies to adequately support a decent quality of life for our workers. Any Democratic candidate seems more likely to move in that direction than the current administration.
Photo by Jonathan Kho