Poverty increased most in states with poorer unemployment benefit systems

Poverty rose at the fastest rate in nearly 60 years in 2020, but the increases were uneven across states.

While some states saw a huge increase, others kept poverty rates at pre-pandemic levels — largely because they provided unemployment benefits to a higher share of their populations.

Poverty grew by 1% last year, meaning 8 million more people entered poverty. In states where at least 35% of jobless workers received unemployment benefits, poverty rose by 0.8%. But in states that doled out benefits to less than 35% of unemployed residents, poverty increased by 1.3% in 2020, a study from the University of Chicago and Notre Dame found.

“It tends to be mostly southern states, and some Plains states, and a few other states that have unemployment insurance systems that are particularly stingy,” Bruce Meyer, a University of Chicago economist and author of the analysis, told Yahoo Money. “In the states where the unemployment insurance systems have not been very good at reaching those out of work, poverty has risen more.”

In the first quarter of 2020, there were 24 states that had less than 35% of their jobless workers on unemployment insurance, including Florida, Arizona, and Mississippi, which have the three lowest recipiency rates of 8.9%, 11.1%, and 12.5%, respectively.


On the other end of the spectrum, 26 states and Washington, D.C., have rates 35% or higher, including Minnesota, North Dakota, and Massachusetts, which have the highest rates of 73.1%, 77.1%, and 80%, respectively.

During the pandemic workers who didn't qualify for regular Unemployment Insurance (UI) could have applied for Pandemic Unemployment Assistance (PUA), a program available to self-employed workers, contractors, and others that is available until March 14. The analysis did not include those on PUA.

In states where the recipiency rate of unemployment benefits is above 35%, poverty rose in 2020 by 0.8% while states that are below that recipiency rate saw a 1.3% increase.( Graphic: David Foster/Yahoo Finance)

With millions of jobs lost in the pandemic and over 18 million people still relying on unemployment benefits, jobless Americans needed that support during the pandemic.

“The principal hardship wreaked by the pandemic, at least on people's incomes, has been job loss,” Meyers said. “In states where the unemployment insurance systems have not been very good about reaching those out of work, poverty has risen more.”

Poverty in the U.S. actually declined at the beginning of the coronavirus pandemic, thanks to the extra $600 in weekly unemployment benefits paid through the summer as well as the $1,200 stimulus checks that were distributed in the spring.

Poverty dropped to 9.3% in May, down from its 10.8% pre-pandemic level, but it increased to 11.8% in December as government support decreased or lapsed altogether. The December poverty numbers don't include the effects of the $900 billion stimulus package, which included $600 stimulus checks, an extra $300 in weekly jobless benefits, and the extension of key unemployment programs.

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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

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