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The Exploding American Poverty Rate

February 15, 2021

As the COVID-19 pandemic spikes again and federal stimulus trails need, the U.S. poverty rate is exploding at a rate never seen before. In fact, nearly 8 million Americans have fallen into poverty over the last five months alone, a new study shows.

The official poverty rate is still relatively low by historical standards, but the increase this year has been the largest jump since the government began tracking six decades ago. The rate jumped to 11.7 percent last November, up 2.4 percentage points since the prior June.

The federal poverty line is $26,200 for a family of four, which is quite low. Economists say the sharp rise in poverty is occurring for two reasons:

  1. Millions of people can’t find jobs
  2. Government aid for the unemployed has declined sharply since late summer

Last year, the average unemployment payment was more than $900 a week from late March through the end of July. But it fell to about $300 per week in August, making it harder for the unemployed to pay their bills.

How do we fix this?

There are two ways to counteract this upward trend in poverty. One is a dramatic improvement in the labor market, which seems unlikely. The other is more support from the federal government, which may happen on some level.

The unfortunate part is the poverty rise is hitting minorities and the undereducated the most. These folks have experienced some of the largest job losses during the recession, as many of them work in low-wage restaurant, travel, and retail positions which have been hit hardest by the pandemic.

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