IRP Book Talk: Zach Parolin on Poverty in the Pandemic: Policy Lessons from COVID-19

Siers-Poisson [00:00:05] Hello and thanks for joining us for the Poverty Research and Policy Podcast from the Institute for Research on Poverty at the University of Wisconsin-Madison. I’m Judith Siers-Poisson. For this episode. We’re going to be talking with Dr. Zachary Parolin about his new book, “Poverty in the Pandemic: Policy Lessons from COVID-19.” That was published by the Russell Sage Foundation. Dr. Parolin is an assistant professor of social policy at Bocconi University in Milan, Italy, and a senior research fellow at Columbia University’s Center on Poverty and Social Policy. He’s published widely on topics related to the measurement sources and consequences of poverty. Zach, thanks so much for joining us today.

Parolin [00:00:47] Thanks for having me, Judith. I appreciate it.

Siers-Poisson [00:00:49] We’ll look at this in more detail in just a bit, but to get us started, can you give us a brief overview of how poverty is currently measured in the United States?

Parolin [00:00:59] Sure. So typically, the way we measure poverty, whether we use what’s called the Official Poverty Measure or what more researchers prefer, which is the Supplemental Poverty Measure, they both share a few common characteristics that are worth talking about in relation to this book and in relation to the COVID-19 pandemic. First, these measures are annual measures of poverty. They’re produced once per year and they compute, they look at income received over the prior calendar year. One other important component is that there’s generally a pretty long delay between when a year ends and when the Census Bureau releases the official poverty estimates for that year. For example, in 2020, which was the first year of the pandemic, we didn’t know the official estimates of poverty from the Census Bureau until September 2021. And of course, there’s no replacement for the quality and thoroughness of the Census Bureau. But there are times when we need more timely estimates of poverty and perhaps estimates of poverty that are focused on shorter periods that capture some of that month-to-month volatility in economic well-being that a lot of households across the country experience, particularly in the context of COVID-19.

Siers-Poisson [00:02:15] Zach, you present three perspectives for understanding poverty in your book: poverty as a risk factor, poverty as an expression of access to current resources, and poverty as a stratifying factor. Let’s go through those one at a time. How does poverty function as a risk factor?

Parolin [00:02:34] Sure. So let me start by just saying, typically when researchers like me think about poverty, we typically think about this point-in-time state; whether a household or a family unit’s, current resources are sufficient to meet their basic needs, whether their income is greater than the poverty line. But that type of point-in-time snapshot approach, while useful, is also incomplete in the context of a pandemic and also many other cases. And so that’s why in this book, I do broaden out, as you mentioned, and focus on three perspectives. And the first one, you mentioned poverty as a risk factor. And the idea here is that poverty can act as a preexisting risk factor by preexisting in the context of the pandemic. I mean, they were exposed to poverty prior to the pandemic, and that greater exposure to poverty can then increase the likelihood of experiencing a life disruption. So, think of an example in the context of the pandemic. The book gets into these in detail, but health risks are one can show directly in the book that the more time someone spent in poverty prior to 2020, the onset of the pandemic, the higher the likelihood that they were to face a COVID-related fatality. And in fact, when we just looked at county level evidence, we see that the highest poverty counties, the counties that enter the pandemic with the highest poverty rates, had twice the per capita death rate as the lowest poverty counties. And these types of patterns exist at the individual level as well. It’s not just health, but also employment, shown in the book using a certain type of panel data that individuals entering the pandemic in poverty faced the greatest likelihood of losing their jobs in the initial months of the pandemic. In fact, entering the pandemic in poverty was a stronger predictor of job loss than parenthood, than gender, than race, ethnicity, than a number of other characteristics that received a lot of focus in 2020 and 2021. So, this idea that your exposure to poverty before a big event like the pandemic makes you more vulnerable to some of these life disruptions, that is poverty as a risk factor.

Siers-Poisson [00:04:43] And the next perspective is probably the closest to what many people think of when they hear the term poverty, and that’s a current lack of resources. You mentioned that before, but can you expand a little more on what that really means?

Parolin [00:04:58] Yeah. When we’re looking at current resources, we’re really talking about, “Do households have enough income right now to meet their basic needs?” And this is best personified in the poverty rate. We produce a poverty rate across time, across places, across groups. And this is really the empirical backbone of a lot of research in our field right now. But there are certain contexts when the standard poverty rate that we use is not fit for the moment. We mentioned at the start of our talk that the standard poverty rates that we have right now are annual. They focus on prior year’s income and they’re released with a long delay. And so in this book, what I put forth from some joint work with my colleagues at Columbia University is a measure of monthly poverty that looks at income received over the prior month and that can be released in close to real time. So, what we were able to do is measure poverty on a monthly basis throughout the pandemic and show the efficacy of government policy interventions in reducing poverty on a monthly basis. Back in April 2020, for example, we could show already in May how the stimulus checks and those expanded unemployment benefits as part of the CARES Act were reducing poverty. And in fact, they cut poverty pretty immediately to a monthly rate that was lower than before the pandemic started. So having this more timely measure of poverty allows us to better inform our decisions and allowed us to show how poverty evolved throughout the pandemic on a month to month basis.

Siers-Poisson [00:06:30] And finally, I found this perspective to be especially interesting, and that’s poverty as a stratifying factor. What do you mean by that?

Parolin [00:06:41] Sure. So, we talked before that in some cases, poverty can serve as a risk factor. But there are certain types of life events where experiencing poverty doesn’t necessarily make you more or less vulnerable to a certain life disruption, but it can still affect how you cope with that life disruption. And the best example of this in the pandemic is school closures. Exposure to poverty didn’t make one student more likely to be in a school that turned to distance learning than others, at least on average. Nonetheless, when schools did turn to distance learning, it was students from the lowest-income families who suffered the most. This is the idea that poverty can act as a stratifying feature that moderates the consequences of a like disruption, and in this case, the closure or the turn to remote learning that many schools underwent during the pandemic. The evidence suggests that lower-income students who were attending schools that were primarily in remote learning suffered 50% more learning loss in mathematics compared to higher-income students who faced remote learning. It’s not hard to understand why; many lower-income households don’t have the laptop and reliable Wi-Fi connection and the special desk in the special room for the student to go and learn. The parents are less likely to be able to work from home and so on. The student might have been more likely to get his or her only warm meal of the day from school, which now the students not attending in-person. So, there’s many challenges that add up to poverty acting as a stratifying future. And we saw that really clearly in the case of school closures during the pandemic.

Siers-Poisson [00:08:23] Are there any other lessons or insights that the COVID pandemic gave us on poverty and approaches to alleviating poverty that we should consider?

Parolin [00:08:34] Some of the most important lessons on poverty that we should take away from the pandemic are the efficacy of certain types of government policy interventions in reducing poverty and reducing hardship for families that would otherwise be going through tougher times. During the pandemic, there were dozens of policy experiments that the federal government unleashed in pretty rapid succession everything from an unconditional and almost universal child allowance that went out monthly to parents of children, regardless of the parents’ employment or earning status, for the first time. We had the largest expansion to access to unemployment benefits that we’ve seen, but also the largest increase in benefit levels. We had an $800 billion program that was meant to provide loans to small businesses and that was meant to retain a lot of workers who might have otherwise lost their jobs. And when you look across these programs, there’s different lessons you take from each and this is what the book gets into. Some of these programs, like the expanded Child Tax Credit, had a strong effect on the wellbeing of lower-income households. I show in the book that the Child Tax Credit reduced poverty, reduced hardship and more, which we might talk about later. Other programs like that $800 billion loan to small business program, the Paycheck Protection Program. Evidence suggests it was effective in saving some jobs, but at extraordinary cost. In fact, most of that $800 billion ended up in the hands of those who are already pretty well off, as opposed to those at the bottom of the distribution. The book gets into a lot of these different policies and tries to tease out the lessons we can learn. But the point is that there are lessons to be learned. And even if the pandemic was a very peculiar context, there is, with a bit of caution in extrapolating beyond the pandemic, a lot we can learn in terms of which policies work and which policies don’t, in making life better for low income families. And the book focuses a lot of its attention on deriving what those lessons are.

Siers-Poisson [00:10:39] We touched on this earlier, but as you said in your book, you do talk a lot about how and why current ways of measuring poverty are not sufficient. And as you said, you go on to describe what more frequent, more nuanced measures would look like. Can you tell us more about your proposals for better poverty measures?

Parolin [00:10:59] Yeah. The main proposal that the book offers is that we need other types of poverty measures to supplement, not replace, but to supplement the standard annual poverty measure that the census bureau provides each year. I talked a little bit earlier about the monthly poverty measure that we use in the book. This monthly measure, as I mentioned, allows us to evaluate in close to real time how well government policy interventions are working to reduce poverty, or more broadly, how on a month-to-month basis families are faring when the economy, as in the case of COVID-19, collapses and reaches an unemployment rate of close to 19%. The timeliness of the poverty estimates is one thing, and there’s a lot of work still to be done. But the book talks about improving our measures of poverty moving forward, not just on timeliness, not just on supplementing that annual poverty measure with this monthly poverty measure, but also thinking through what should a better poverty measure look like? What types of outcomes should a better poverty measure be aligned with, and in turn, what changes need to be made to our current measures of poverty to achieve those benchmarks? There’s been a lot of discussion over the past year about the strengths and weaknesses of the Supplemental Poverty Measure, of the official poverty measure, by evaluating trends in these measures. But there’s been a bit less discussion over what should an optimal measure look like, what benchmarks should it be meeting and how do we get there? And I think this focus on putting in the work to improve our poverty measures with transparent criteria in place is an important step going forward and improving the way that we think about poverty in the U.S.

Siers-Poisson [00:12:52] Do you think that those improved measures would be particularly useful in times of crisis, like, for instance, a global pandemic, or are there really concrete applications in what we might call “normal times?”

Parolin [00:13:06] It’s a great question. I think there are, of course, certain context where something like the monthly poverty measure is going to have greater value add, certainly in the context of the pandemic, that measure becomes more useful than, say, in 2018 when the economy was a bit more steady. But that said, I will emphasize that from about 1990 to 2019, it’s still the case that families with children in particular faced more within-year variation in monthly poverty rates than between year. In part because the way our welfare state is structured is to provide these tax-based refundable credits and tax credits that provide families with children, on average, about one third of all the income transfers they receive in a year are provided at one time, at tax time. If you think of the Earned Income Tax Credit, the Child Tax Credit and more. So, I do think there is some value in understanding multi-month volatility in actual income on hand, actual consumption power, even in, let’s say, more normal times. But certainly, the pandemic and more volatile economic moments are where that monthly poverty measure might be more useful. Let me add one point, though, that even in quote unquote, normal times, there are certain peculiarities of our poverty measures that deserve interrogation. Not the least, evidence from the current population survey suggests, for example, that Black families who are not in poverty still experience food hardship at the rate of White families with children who are in poverty. There’s some really large gaps across certain demographic groups in the overlap of poverty and food hardship, and this doesn’t necessarily suggest we need to change our poverty measures. What I’m suggesting is we need to interrogate these findings a bit more to understand, are there implications for the ways we think about poverty, and if so, how can we improve these measures moving forward? This is what the book suggests. Even in normal times, we should be interrogating questions like this.

Siers-Poisson [00:15:08] And looking more at those implications for the type and quality of poverty measurement that we are able to do, as a researcher, what do you see the most important outcomes of better measurement might be? And for policymakers, how might they use those better measures?

Parolin [00:15:27] I think the more information we can have in close to real time across a suite of indicators that represent the economic, the material, the psychological, the physical well-being of residents across the country, the better we’re going to be in guiding effective policy responses to, put simply, make life better for people across the country. And there’s some concrete ways we can get better at this moving forward. In the final chapter of the book, I talk a little bit about how we can improve poverty measurement just by adding a few extra questions to the government surveys that we run on a regular basis. In the European Union, there’s a survey that’s similar to the current population survey that many listeners might be familiar with. It’s called EU-SILC for short. That’s the primary source of data used to measure poverty across the European Union. And one nice feature of EU-SILC is that in that same survey, there’s a handful of questions on material hardship, like food hardship or objective hardship and so on, all within the same survey so that we can get a better and more multidimensional measure of poverty without having to even try to compare across surveys. These are relatively simple additions that can be made to US based surveys run by the Census Bureau and Bureau of Labor Statistics to improve the quality and quantity of information we have in pretty short time. And it can be done in ways that don’t impose too much of a burden on the people taking the surveys out there. So I think there’s a number of ways to improve our thinking and measurement of poverty that can be done relatively simply if there is a an impetus for the change in the way that we administer some of our government based service.

Siers-Poisson [00:17:13] That final chapter of your book that you just mentioned, which is titled “Ten Policy Lessons for Improving Economic Well-Being after the COVID-19 pandemic,” has a lot of, like you just said, very concrete policy suggestions. We don’t have time to go through all ten of them, but I’d like to zero in on a couple of aspects. Two of your recommendations relate to cash assistance programs, the Child Tax Credit, and the Temporary Assistance for Needy Families Program. Can you talk about what you propose with those programs in particular?

Parolin [00:17:45] Yeah, these two programs received some attention in the book and for different reasons. The expanded Child Tax Credit that came out of the American Rescue Plan Act 2021 provided low-income families, regardless of the parents employment or earning status, with monthly cash payments for six months, and then a larger refundable payment at the end of the year, at tax time. And the evidence from a number of studies, including those that I’ve been part of that I talk about in the book, suggest that the expanded Child Tax Credit cut the monthly child poverty rate by about a third and contributed to the lowest child poverty rate in U.S. history in 2021. Despite the relatively high rate of unemployment, it temporarily brought the U.S. child poverty rate in line with Germany’s, had the US social safety net cutting child poverty at the rate of Norway, temporarily cut food hardship, increased low-income families consumption at child care centers and grocery stores. Not bad for a six-month policy intervention. And there’s more and more data coming out. There are, of course, things we would need to watch for if this program became permanent. Might it have some employment effects that offset some of the gains in poverty reduction and so on? These would need to be checked, but the evidence so far suggests, at least for the one year it was implemented, there weren’t any strong consequences for employment. The Temporary Assistance for Needy Families Program, on the other hand, did very little to reduce poverty and improve wellbeing during the pandemic. State governments run what’s called TANF. They run their own programs and they can choose more or less how to allocate the resources they receive from the federal government according to four really broad categories. And I won’t get too deep into the program other than to say that the amount of resources that states allocated to cash assistance to support families in need during the pandemic barely went up. And in fact, even in 2020 was still lower than the amount the states were spending on cash assistance in TANF in 2018 or 2017. This is a program that’s been declining in funding levels year after year. Benefits have declined across most states. Access to cash assistance has declined in most states, to the point where I make a recommendation in the final chapter that says if TANF needs to be traded in in order to achieve a return to a fully refundable, expanded Child Tax Credit like we saw in 2021, I think members of Congress should be willing to consider that. This is not a proposal that I’ve just invented. This is a trade in that some conservative policymakers were offering in proposals to expand some version of a fully refundable Child Tax Credit just a couple of years back. And there was some resistance to this at the time. I try to make the case in the book that if trading in TANF could really increase the odds of getting to a monthly cash payment that reaches even those families with children who aren’t actively engaged in employment, that is worth the trade. Precisely because of what we saw in 2021 in terms of the efficacy of the expanded Child Tax Credit, there would be costs to this trade in, and I talked about some of those in the book. And it might not be necessary. Ideally, Democrats and Republicans would engage in tax-based negotiations like they usually do on expanding things like the Earned Income Tax Credit. But these programs had vastly different effects during the pandemic. And I think moving forward, we want more of the expanded Child Tax Credit relative to TANF, that’s not what we have right now.

Siers-Poisson [00:21:32] One of the aspects of getting assistance to people who need it, especially during a time of disruption, is how quickly that can be turned around. What are your suggestions or recommendations for making sure that assistance is available as soon as it’s needed?

Parolin [00:21:49] In the book, one of the policy proposals I put forth is to install these types of automatic stabilizers or these triggers that can turn on and provide immediate economic support when certain economic conditions are met. And I want to be clear that this idea is not novel to this book. In fact, there is a book called “Recession Ready” that a handful of researchers put out actually before the COVID-19 pandemic. Looking back on lessons from the prior recession, they put forth this idea that stimulus checks or increases to SNAP benefits could be triggered automatically to prevent long delays when Congress needs to get together and deliberate. Which of these policies to turn on and for how long? And also just to reduce the tradeoffs of timeliness and the duration of benefit provision that are really hard to get right ahead of time when members of Congress are trying to predict how long an economic collapse is going to occur. So in that work, Claudia Sahm, for example, had an idea of turning on stimulus check payments when certain economic conditions were met. Hilary Hoynes and Diane Schanzenbach had this idea of increasing the maximum value of SNAP benefits automatically when certain economic conditions were met. And I really just build off their ideas and give them the credit in this book. But I show one thing that with the SNAP idea in particular, having these types of automatic stabilizers that Hoynes and Schanzenbach and others have proposed would have made a big difference in the context of COVID-19. It took until the end of 2020 for SNAP benefits to increase to 15% above their maximum values. But had the automatic stabilizers been in place to install this when the economy actually collapsed, these would have kicked in as soon as April 2020. And I show in the book that if you simulate how this policy might have affected low-income families, it could have lifted about 2 million more people per month out of poverty each month from April 2020 through December when it finally turned on. So just echoing what some others have said in the past and bringing its potential relevance to the pandemic, if we want to reduce these tradeoffs of timeliness and benefit duration in the future, actually installing and implementing some of this automatic stabilizers in advance, whether it’s SNAP benefits or unemployment benefit expansions, would help out a lot more when the next crisis eventually arrives.

Siers-Poisson [00:24:22] You just mentioned researchers drawing some lessons from the Great Recession. We’re talking about lessons learned from the COVID-19 pandemic. Zach, I’m going to ask you to look into your crystal ball for a moment. Have we learned enough from the COVID health and economic crises to be better positioned for whatever the next large-scale disruption might be?

Parolin [00:24:45] I’m afraid that the answer is probably no. I’ll give a couple of reasons why. One of the strongest pieces of evidence to come out of the pandemic, and that I talk a lot about in the book, is how early and consistent exposure to poverty directly increases the likelihood of dealing with these adverse life events when a crisis strikes, particularly when a crisis strikes. We talked earlier about the health consequences, the employment consequences, the learning loss consequences that disproportionately fell on individuals, I show in the book, were experiencing poverty even early in their childhood and were accumulating these disadvantages throughout their life. One way to reduce those disadvantages as early as childhood is to again provide direct cash payments to families with children, at least with young children, to ensure that they can start lives on the right foot and have more access to resources when they’re growing up. We have the Child Tax Credit in 2021. It was not extended. And not only that, in the past year, we’ve seen Congress restrict access to other income support programs rather than learning lessons from the pandemic and expanding access. We’ve seen more work requirements installed within the TANF and SNAP programs. Instead of, again, access to cash support being made more available for all. That’s one lesson we still haven’t learned, and it’s one reason why the U.S. still to this day, at least in 2022 and 2023, has higher child poverty rates than most the rest of the developed world. That was not the case in 2021 when we finally had a Child Tax Credit in place. But one other set of lessons that I talk about in the book is preparing for the next recession or the next economic crisis. We already talked about some of the automatic stabilizers that, again, researchers were talking about well before the pandemic, but another program that could be reformed to better serve low-income individuals in the next crisis is the Paycheck Protection Program, or this attempt to provide loans to small businesses in order to allow firms to keep their workers rather than having to lay their workers off and sending them into the unemployment benefits system. We should have learned our lesson a long time ago. On this program, we saw in the Great Recession, countries that effectively used short time work sharing schemes, in Germany as one example, but also in the U.K., they avoided a lot of the labor market collapse that the U.S. experienced because they had these job protection schemes in place already. When the pandemic hit, we sort of rushed to create our own rather than being prepared as we probably should have been many years before. And my sense is that even after the pandemic and having seen how rushed the distribution of small business loans was during the pandemic, my sense is that we’re still not prepared for another economic collapse and having to get this program off the ground and to support the employment of workers out there. My sense is that the work still hasn’t been put in to make sure this program can really allow firms to keep their workers, and place some accountability mechanisms in there to ensure that firms are not just using this money to support those who are already better off, but actually support those who need to cling on to the jobs the most. So, I think there’s a lot more to be learned. As to whether we are currently prepared and whether we currently learn those lessons. My take would be that there’s more to be done.

Siers-Poisson [00:28:24] And that leads into my question of what future research would you like to do or see done on this topic?

Parolin [00:28:32] I think future research on this topic could go in a few different directions. One, I think we need more cross-national comparisons in general of poverty and social policy. I’m going to generalize here a little bit, but I think there is a strong tendency for economists and policy scholars and sociologists in the U.S. to sometimes forget that other countries exist and have their own welfare states and might have lessons for us to apply here within the U.S. we have learned some of those lessons temporarily. Talked a lot about the Child tax Credit. Well, most other high-income countries offer some kind of unconditional child allowance to families, to children. The US doesn’t, but this is something that we can learn and that scholars have learned when they engage in cross-national research and try to understand why child poverty rates tend to be lower in other countries. But I think going beyond that and deriving more policy lessons from countries who are doing a better job than us at reducing poverty, what we can learn from those would be fruitful moving forward. And again, there is a lot of great research already ongoing in this area, but I would argue that more cross-national work is always better and would benefit us all. The second point I’ll make is on poverty measurement. We talked a little bit about this earlier, but I think a continued effort to think about how we can improve our measures of poverty would be useful. Over the last 20 years, there’s been a lot of progress in this direction, but most of that progress has been focused on two parts: defining what counts as income or resources and how we draw the poverty line. What I suggest is that there are other dimensions we need to consider as well. How frequently can we produce a poverty measure? Over what number of months should we actually count resources in defining poverty? And how quickly can we get these measures out? And the book makes some progress towards those aims with the monthly poverty measure. But as I talk about, there’s a lot more progress to be made and a lot more we can do to improve on these measures and to think about poverty in other dimensions. So, a lot more research to be done in poverty policy and a whole lot more. Luckily, there’s a lot of wonderful researchers out there doing this work and will be for some time. So, I think our research community is in great shape and yeah, I’m happy to be part of it.

Siers-Poisson [00:30:57] Well, Zach, thank you so much for taking the time to talk with us about your book. You’ve given us a lot to think about.

Parolin [00:31:02] Thanks so much. I appreciate it.

Siers-Poisson [00:31:05] Thanks so much to Dr. Zach Parolin. He joined us to discuss his new book, “Poverty in the Pandemic: Policy Lessons from COVID-19.” That was just published by the Russell Sage Foundation, and you can find a link to the book and the program notes for this episode. The production of this podcast was supported in part by funding from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation, but its contents don’t necessarily represent the opinions or policies of that office of any other agency of the federal government or of the Institute for Research on Poverty. Music for the episode is by Poi Dog Pondering. Thanks for listening.