Poverty increased most in states with poorer unemployment benefit systems
Poverty rose the fastest in nearly 60 years in 2020, but the increase has been uneven across countries.
While some states saw huge increases, others kept the poverty rate at pre-pandemic levels - mainly because they provided unemployment benefits to a higher proportion of their population.
Poverty grew 1% last year, which means 8 million more people entered poverty. In countries where at least 35% of the unemployed received unemployment benefits, poverty rose by 0.8%. In states where fewer than 35% of the unemployed were on welfare, poverty rose 1.3% in 2020, according to a study by the University of Chicago and Notre Dame.
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"It's usually mostly southern states, some plains states, and some other states with particularly stingy unemployment insurance schemes," Bruce Meyer, an economist at the University of Chicago and author of the analysis, told Yahoo Money. "In those countries where the unemployment insurance systems have not been able to reach the unemployed very well, poverty has continued to rise."
In the first quarter of 2020, there were 24 states where less than 35% of their unemployed were insured as unemployed, including Florida, Arizona and Mississippi, which have the three lowest reception rates of 8.9%, 11.1% and 12.5%, respectively.
At the other end of the spectrum, 26 states and Washington, DC have rates of 35% or more, including Minnesota, North Dakota, and Massachusetts which have the highest rates of 73.1%, 77.1%, and 80%, respectively.
During the pandemic, workers who had not qualified for regular unemployment insurance (UI) could have applied for Pandemic Unemployment Assistance (PUA), a program available to the self-employed, contractors and others until March 14th PUA included.
In countries where the reception rate of unemployment benefit is above 35%, poverty rose by 0.8% in 2020, while in countries which are below this reception rate an increase of 1.3% was recorded (Figure: David Foster / Yahoo Finance).
With millions of jobs lost to the pandemic and over 18 million people still dependent on unemployment benefits, unemployed Americans needed that assistance during the pandemic.
"The greatest plight that the pandemic brought with it, at least for people's incomes, was job losses," Meyers said. "In countries where the unemployment insurance systems were not very good at reaching the unemployed, poverty continued to rise."
Poverty in the US actually fell at the start of the coronavirus pandemic, thanks to the additional $ 600 weekly unemployment benefit paid in the summer as well as the $ 1,200 stimulus checks distributed in the spring.
Poverty fell from 10.8% before the pandemic to 9.3% in May, but rose to 11.8% in December as government support waned or waned. December's poverty numbers do not include the impact of the $ 900 billion stimulus package, which included $ 600 stimulus tests, additional $ 300 weekly unemployment benefits, and the expansion of key unemployment programs.
The Yahoo Money sister site Cashay has a weekly newsletter.
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.
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Originally published February 2, 2021 12:43 am
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