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September 18, 2021

With Pandemic Benefits Ending, Maryland and U.S. Poverty Rates Could Rise

Credit: Maryland Matters, Shauneen Miranda

The American Rescue Plan and other emergency measures kept an estimated 729,000 Marylanders out of poverty this year, according to a recent congressional report. But the cutoff of extended unemployment and other benefits could trigger a reverse effect.

The coronavirus pandemic brought a new wave of financial hardships for families across the United States.

Federal initiatives sought to combat these financial challenges and reduce poverty, but the temporary nature of these efforts raises questions about whether the estimated decrease in poverty also will be temporary, according to experts.

The percentage of people living below the poverty line fell last year as a result of federal relief programs, according to data released from the U.S. Census Bureau this week.

The Census Bureau found that stimulus payments enacted in response to the pandemic took 11.7 million people out of poverty, which is defined as income below $26,200 each year for a four-person family.

Expanded unemployment insurance benefits in 2020 also had an impact — keeping 5.5 million individuals from facing poverty, according to the Census Bureau.

A report from the Joint Economic Committee in Congress used the Urban Institute’s projections on national and state poverty levels in 2021 to assess the impact of the American Rescue Plan and traditional safety net programs seeking to help individuals during the pandemic.

The Washington-based think tank, which focuses on social and economic policy, projected that Maryland’s poverty has decreased 66.3 percent this year as a result of these combined initiatives.

Prior to the measures put in place, the Urban Institute estimated that Maryland had an 18.6 percent poverty rate. The combination of benefit programs led to a projected 6.3 percent poverty rate in the state, which translates to keeping an estimated 729,000 Marylanders out of poverty.

This year’s poverty rate projections in the United States fell significantly below 2018’s estimates, according to the Urban Institute.

Using the same methods, the annual poverty rate projections nationwide dropped from 13.9 percent to 7.7. percent between 2018 and 2021.

But the extension of unemployment benefits under the American Rescue Plan ended on Sept. 6, a decision that could influence the projected poverty numbers for Maryland and the rest of the nation.

The extended benefits gave people unemployment payments beyond the normal number of weeks they would be entitled to in Maryland.

The benefits also offered $300 weekly in addition to the standard $400, according to Kali Schumitz, director of communications and partner engagement at the Maryland Center on Economic Policy, a nonprofit research organization.

“We definitely would expect the expanded unemployment ending to have some kind of impact,” Schumitz said.

“Because it just happened, we don’t know exactly what the impact of that is going to be, but we do know that most people who are still receiving unemployment assistance payments in Maryland were on those extended benefits programs,” she said.

President Joe Biden’s American Rescue Plan, signed into law in March, sought to alleviate hardships during the pandemic and offer assistance to working families.

The $1.9 trillion package included direct payments, increases in tax credits, an extension of unemployment insurance and small business relief, according to the White House’s official website.

Rep. David Trone, D-Gaithersburg, a member of the Joint Economic Committee, played a role in the passage of the Biden package.

“As the Joint Economic Committee’s report shows, the American Rescue Plan was crucial to reducing projected poverty rates in Maryland and across the country during this public health crisis,” Trone told Capital News Service.

Maryland’s projected poverty numbers for this year, although county rates vary considerably, remain lower than many other states, such as Virginia, New York and California.

Schumitz attributed Maryland’s lower poverty numbers to supplemental federal assistance programs and the state’s own working family tax credit.

Although Maryland also targeted relief to undocumented people who faced exclusions from the various federal programs, Schumitz said the effort did not erase the racial inequalities still affecting communities across the state.

“The hardship rates in Maryland remain well above pre-pandemic levels,” Schumitz said. “There (are) still really large racial inequities because people of color faced the hardships of the pandemic and on top of the existing structural barriers that are already causing more people of color in Maryland to be more likely to be in poverty.”

Using the supplemental poverty measure, the Urban Institute drew from the Census Bureau’s methods for estimating poverty.

“There’s the traditional, official poverty measure that’s been around for decades, and that one just counts people’s cash income,” said Laura Wheaton, a senior fellow at the Urban Institute and an author of the report. “It doesn’t count things like tax credits or SNAP (Supplemental Nutrition Assistance Program) benefits or housing subsidies.”

To define the poverty level, the institute used more recent data on what people spend on food, shelter, clothing and utilities, according to Wheaton.

The poverty measure also subtracts taxes and work-related and childcare expenses from individuals’ incomes.

“Whereas the Census Bureau releases reports each year with their estimates of poverty under the supplemental poverty measure based on survey data, we extend that because…a lot of times in survey data people underreport fair receipt of certain benefits,” Wheaton said.

“We use a model that corrects for that underreporting, so it brings benefits up to the levels paid according to the government and other government sources,” she explained.

Apart from the American Rescue Plan’s impact, Wheaton said the Urban Institute’s data on the projected number of people kept out of poverty in 2021 also includes the standard safety net programs and the other benefit expansions made in response to the pandemic.

Regardless of these numbers, the Urban Institute said its analysis was based only on estimates; complete data on 2021 will not be available from the Census Bureau until September 2022.

“But we know that people want to have an idea of what’s happening in real time, especially in these pandemic times,” Wheaton said. “So, that’s why we’re doing these kinds of projections, to try to give people an idea of what likely is happening, that it’s a projection.”