Poverty, Hardship, and Government Transfers

We examine how the well-being of those with few resources changed, amidst economic disruption and large, transitory government transfers. We find that in the years leading up to the pandemic and in 2020, the patterns for income and consumption poverty were very similar. In 2021 and 2022, however, changes in income and consumption poverty were quite different—consumption poverty fell less than income poverty in 2021, and then income poverty rose sharply in 2022 while consumption poverty continued to decline. Reports of hardships rose in 2022 for both families with and without children, suggesting increased concern about financial well-being as COVID-era transfer programs expired. A key difference between income and consumption measures appears to be saving during the pandemic followed by dissaving, even among those near the poverty line. This finding indicates that permanent income models can even be relevant when low-income households, that typically have very limited saving, receive very large transitory payments. Unlike past academic studies and numerous politicians and pundits that have attributed most of the decline in income poverty in 2021, and its subsequent rise in 2022, to the Child Tax Credit, we show that expanded Unemployment Insurance and stimulus payments played a larger role.