Income and Poverty in the COVID-19 Pandemic

This paper addresses the economic impact of the COVID-19 pandemic by providing timely and accurate information on the impact of the current pandemic on income and poverty to inform the targeting of resources to those most affected and assess the success of current efforts. We construct new measures of the income distribution and poverty with a lag of only a few weeks using high frequency data from the Basic Monthly Current Population Survey (CPS), which collects income information for a large, representative sample of U.S. families. Because the family income data for this project are rarely used, we validate this timely measure of income by comparing historical estimates that rely on these data to estimates from data on income and consumption that have been used much more broadly. Our results indicate that at the start of the pandemic government policy effectively countered its effects on incomes, leading poverty to fall and low percentiles of income to rise across a range of demographic groups and geographies. Simulations that rely on the detailed CPS data and in aggregate closely match total payments made show that the entire decline in poverty that we find can be accounted for by the rise in government assistance including unemployment insurance benefits and the Economic Impact Payments.

This paper was released as part of the Brookings Papers on Economic Activity, scheduled for June 25, 2020.