Federal pandemic aid drove poverty to historic lows

The economic upheaval brought on by the Covid-19 pandemic should have coincided with a sharp increase in poverty. But timely and effective federal aid helped to dampen the blow, ultimately driving America’s poverty rates to historic lows, including in the Pelican State. The Center on Budget and Policy Priorities’ Danilo Trisi’s new report examines U.S. Census data that show this monumental achievement. 

In 2021, the American Rescue Plan’s Child Tax Credit expansion and the third round of stimulus payments, in conjunction with other relief measures, spurred the largest one-year drop in child poverty on record, driving child poverty down to an all-time low of 5.2 percent. The Rescue Plan by itself lifted more people, including more children, above the poverty line with government assistance in a single year than any other piece of legislation enacted in more than 50 years. … The strong government response prevented the pandemic economy from adding further to the already disproportionate risk of poverty borne by Black and Latino individuals, including children. 

Unfortunately, Congress let many of these effective policies, such as the enhanced Child Tax Credit, expire despite their obvious effectiveness at reducing poverty. The Institute on Taxation and Economic Policy’s Joe Hughes and Emma Sifre explain how returning the Child Tax Credit to 2021 levels would advance racial equity in the tax code.

The federal Child Tax Credit (CTC) is one of the most effective tools that the U.S. uses to assist families with children, raise incomes, and reduce poverty. The CTC provides families with a tax credit of up to $2,000 for each child in their household. The credit is only partially refundable, though, with limits that prevent families with lower income from receiving the full credit. Often the poorest families get no credit at all. This means that a policy meant to help children does less for poor children of all races and disproportionately leaves out Black and Hispanic children.

Census needs better race and ethnicity data
The data collected for the U.S. Census has far-reaching and long-lasting impacts. The government uses this information to allocate millions of dollars of public resources over a decade and gives policymakers insight into societal trends and unmet needs. But the federal government has historically done a poor job of collecting race and ethnicity information. Brookings’ Wendy Castillo explains how students can benefit from better federal government data collection and the consequences of falling short when capturing race and ethnicity data. 

First, race and ethnicity should be merged into one question allowing individuals to mark all that apply: “What is your race or ethnicity?” The status quo—with separate questions about race and ethnicity—results in an estimated undercount of Latinos by five percent and overcounting of white individuals. This is especially concerning for school districts or state departments of education using this approach, given that Latinos represent 14.1 million K-12 students (or 28% of the public school population). A five percent undercount translates to hundreds of thousands of students potentially being misidentified.

Extending overtime to salaried workers
The White House proposed a new rule on Wednesday that would extend overtime pay to millions of salaried workers. While most hourly workers are eligible for overtime pay, many salaried employees are not. The new rule would increase the threshold under which non-salaried workers could earn overtime pay from $35,568 per year to $55,000 per year. The Washington Post’s Lauren Kaori Gurley explains how this move would help salaried workers in low-wage industries. 

The rule would boost wages for many workers in low-wage but salaried occupations — including in hospitality, manufacturing and retail — making them eligible for time-and-a-half pay after working more than 40 hours in a week. For example, a salaried restaurant supervisor or clerical worker who makes more than $35,568 but less than $55,000 would now be eligible for overtime pay. The proposed change stands to boost the finances of millions of the country’s most vulnerable workers, including women, people of color and workers without college degrees. In another major change, the rule would include automatic updates to the salary level for overtime eligibility every three years based on wage data.

Wanted: public sector workers
While employment in the private sector has recovered from the Covid-19 pandemic, public-sector employment has not. This slow hiring recovery could become problematic as an influx of dollars from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act become available to state and local governments. As Route Fifty’s Molly Bolan explains, the lack of public-sector employees could hinder the ability of governments to compete for and administer federal grants.

“A lot of the provisions in [the Inflation Reduction Act] need to be implemented on a local and state level and rely on grants that require a significant amount of capacity from these governments to first apply for the grants, and then implement the projects over a period of multiple years,” [Nikhita ] Airi said. For some governments, the approaching tide of federal funding will feel familiar. When the American Rescue Plan Act released billions of dollars to state and local governments, Airi said, many employees felt like they were “drinking water from a firehose.”

Number of the Day
5.4% – Delinquency rate for U.S. consumer loans. Delinquencies for auto loans, credit cards and consumer loans are at the highest levels in a decade. (Source: Equifax/Moody’s Analytics via the Washington Post)