Stimulus measures helped lift 1.6 million Americans out of poverty

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·4 min read

A second round of stimulus checks and renewed unemployment benefits lifted 1.6 million Americans out of poverty last month, marking the first drop in poverty after six straight months of increases during the pandemic.

The poverty rate fell to 11.3% in January, after reaching its pandemic peak of 11.8% in December. The decline was largely the result of relief provisions included in the December $900 billion stimulus package, such as the $600 stimulus checks, the extra $300 a week in unemployment benefits, and the renewal of two other jobless programs, a new study from the University of Chicago and Notre Dame found.

Read more: Here's what to do if you haven't gotten your stimulus check

"That's a pretty big move over the course of one month," University of Notre Dame's James Sullivan and one of the authors of the study told Yahoo Money. "In response to the government issuing a new round of stimulus payments and reviving the supplemental employment insurance, we now see that poverty is starting to fall."

Poverty had risen for six months in a row, coinciding with the double expiration of extra weekly unemployment benefits, first in July when the additional $600 lapsed and then in September when the supplemental $300 ran out.

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At the same time, no new direct payments went out in the summer and fall, resulting in the poverty rate hitting 11.8% in December. After the first relief deal in March with $1,200 stimulus checks, poverty actually dropped to 9.3% in May, down from its 10.8% pre-pandemic level.

The poverty rate for Black Americans dropped 2.1 percentage points in January, but it remains high at 21.3% poverty rate. For white Americans, the poverty rate fell less than a point, but the overall rate is far lower than Blacks at 9.6%.

"The groups that benefited the most from December to January are really the groups that were hit the hardest in the six months prior to that," Sullivan said.

'Would lead to reductions in poverty'

Overall, fewer than 4 million Americans found themselves in poverty during the pandemic and any additional stimulus could help lift more out of it.

"The changes in poverty during the pandemic align nicely with the relief packages the government has passed," Sullivan said. "The results we have thus far would strongly indicate that additional stimulus and extensions of supplemental unemployment would lead to reductions in poverty."

IMMOKALEE, FLORIDA - FEBRUARY 16: Food is distributed during a mobile food pantry in the agricultural community of Immokalee on February 16, 2021 in Immokalee, Florida. The Harry Chapin Food Bank has weekly distributions in the town which has a poverty rate of over 40% and has a population made up primarily of agricultural workers. The mobile food pantry gives out food packages for over 800 families after seeing a surge in need since the Covid-19 outbreak. (Photo by Spencer Platt/Getty Images)
Food is distributed during a mobile food pantry in the agricultural community of Immokalee on February 16, 2021 in Immokalee, Florida. (Photo by Spencer Platt/Getty Images)

President Joe Biden's $1.9 trillion stimulus plan that Congress is considering includes provisions that could further reduce poverty in the spring, including $1,400 stimulus checks, $400 extra in weekly unemployment benefits, and an expansion of some tax credits, according to Sullivan.

Biden’s plan would improve the Child Tax Credit (CTC), making it refundable and worth up to $3,000 per child — or $3,600 for a child under 6 — for 2021. The eligibility requirements for the Earned Income Tax Credit (EITC) would also be expanded under Biden’s proposal.

Read more: Here's what's in Joe Biden's $1.9 trillion 'rescue plan' that could help your wallet

If implemented, Biden's plan would push the poverty rate to around 9% this year — much lower than its pre-pandemic level of 11.7% in 2019 — according to an analysis by Columbia University’s Center on Poverty and Social Policy. Over 11.6 million people would be lifted out of poverty in 2021, the analysis estimated.

“It would represent a historic effort to cut poverty and, particularly, child poverty,” Megan Curran, a postdoctoral research scientist and co-author of the report, told Yahoo Money in January. “We can't get out of this crisis unless we make sure that families who have been struggling the most are able to meet their needs. This package would go a long way in making sure that's possible.”

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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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