Stimulus led 'to dramatic declines in material hardship' amid the pandemic, data shows

·3 min read

The last two stimulus packages significantly reduced the number of Americans suffering from hunger, financial hardship, anxiety and depression, a new study found.

Financial instability fell by 45% from December 2020 to April 2021, according to a new paper by Poverty Solutions at the University of Michigan. Additionally, food insufficiency decreased over 40% and mental health symptoms dropped by 20%.

“Following the December COVID Relief bill and then again from the American Rescue Plan passed in March, you see dramatic declines in material hardship experienced by U.S. households,” Patrick Cooney, a professor at the University of Michigan who co-authored the study with Luke Shaefer, told Yahoo Finance Live (video above). “Just an amazing and dramatic sign that stimulus checks and expanded unemployment insurance are doing an awful long way to support U.S. households in the pandemic.”

Stimulus Check: USA government check, payment
Photo: Getty Creative

As part of those packages, Americans received two rounds of stimulus checks — $600 per person checks were distributed in the winter and $1,400 per person payments were sent out in the spring. Additionally, unemployed workers received extra weekly benefits of $300 during the same period. Both measures helped alleviate financial hardship for U.S. households, according to Cooney, which, in turn, helped to lessen mental health issues.

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

Declines in material hardship were greatest among low-income households. At the end of 2020, 28.6% of households making below $25,000 reported that paying for usual household expenses was very difficult. That number dropped to 16.1% in April as the $1,400 checks were distributed.

Food scarcity also fell at a record pace, driven by a steep decline in hardship among low-income households. Between December 2020 and April 2021, the number of adults earning below $25,000 who reported food insufficiency fell by over 3 million. Additionally, food insecurity significantly dropped for households making between $50,000 and $100,000, the paper found.

‘In a better bargaining position to get higher wages going forward’

Improved mental health also coincided with the implementation of the two relief bills. More than two thirds of adults reported feeling nervous, anxious, or on edge in December, but six months later, just over half of adults felt that way.

Despite these benefits, critics now argue that the pandemic benefits — specifically the jobless programs — are keeping workers from returning to their jobs. Twenty-five GOP-led states plan to opt out of federal unemployment programs this month even though they expire on September 6.

Despite missing estimates in April and May, overall job growth has been faster than in past recessions, according to Cooney, and workers will come back as the economy reopens. They also may be able to negotiate higher wages, he said.

“The expanded unemployment insurance — for the first time in a long time — has provided workers with a bit more bargaining power than they've had in a while,” Cooney said. “If this relief package sort of puts workers in a better bargaining position to get higher wages going forward, that's a great outcome going forward.”

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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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