Opinions Poverty

What the Pandemic Has Taught Us About Poverty Reduction

, by Zachary Parolin
There are several policy lessons coming from the recent past which cannot be ignored for the future. In the US, the povertyreducing measure of the expanded Child Tax Credit, now unfortunately reversed, points to considering the cumulative effects of poverty along the effects that economic hardship has on people at every point in time

When the COVID-19 pandemic brought labour markets across Europe and the United States (US) to a standstill in 2020, poverty rates threatened to rise. In the US, however, the federal government offered unprecedented economic relief that not only prevented an increase in poverty, but actually managed to cut child poverty in half in 2021, achieving the lowest child poverty rate in the country's modern history. Recently, however, the U.S. Census Bureau revealed that much of that progress was lost in 2022: child poverty rates increased dramatically from 2021 to 2022, climbing back to their pre-COVID levels. What lessons should policymakers in the US have learned from COVID-19 for maintaining low poverty rates moving forward? In my new book, Poverty in the Pandemic: Policy Lessons from COVID-19, I emphasize ten of such lessons, a couple of which I preview here.

First, if the U.S. wishes to get back to its record-low child poverty rates, it should return to the policy that made it possible: the expanded Child Tax Credit (CTC) which in 2021 provided cash payments to nearly all families with children regardless of their parents' employment status. The consequences of the temporary CTC expansion were vast: it immediately cut monthly child poverty rates by around one-third, contributed massively to the record-low child poverty rate in 2021, temporarily brought the U.S. child poverty rate in line with Germany's, had the American welfare state cutting child poverty at the rate of Norway, cut food hardship among families with children by around one-fourth, had no meaningful short-run consequences for employment, and increased low-income families' consumption at child care centers and grocery stores.

Despite a record-low poverty rate in 2021, however, low-income families still struggled mightily during the pandemic, emphasizing a second takeaway: reducing point-in-time poverty rates, while an important policy achievement, is far different from eliminating the disadvantages associated with cumulative poverty exposure. Poverty is not merely a point-in-time state, but an economic condition that, once experienced, often lingers throughout one's life, inflicting costs that range from poorer health conditions to reduced long-run economic opportunities. This was never more evident than at the onset of the pandemic.
At the start of 2020, the average Black adult who was in poverty had also spent 57% of their childhood in poverty, compared to 20% for the average White adult in poverty. These disparate experiences of poverty, accumulating from birth onward, contributed directly to racial/ethnic disparities in health and employment outcomes at the onset of the COVID-19 pandemic. Cumulative exposure to poverty from childhood through the onset of the pandemic helps to explain why adults in the highest-poverty counties in the U.S. had a COVID-related death rate nearly twice that of adults in the lowest-poverty counties, equivalent to the gaps in death rates between Germany and Romania in the European Union.

The policy response thus cannot stop at reducing current economic hardship, but also must focus on proactively narrowing long-run disparities in economic opportunity. This includes, as one example, better monitoring of federal education funds to ensure that they are more appropriately used to offset pandemic-induced learning disparities. In my book, I document several other policy lessons emerging from the pandemic which can reduce economic disparities moving forward. The COVID-19 pandemic offered many lessons for improving economic well-being in the U.S. beyond the pandemic. We witnessed the menacing consequences of poverty, but also the enormous power and capability of the state to reduce poverty and improve well-being among households going through difficult times. To not apply these lessons moving forward would go to the detriment of all those who happen to experience life as low-income residents in America.


Bocconi University
Department of Social and Political Sciences