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Income Assistance for Low-Income Workers During the COVID-19 Crisis

By and ·May 7, 2020
Wellesley College and Northwestern University

The Issue:

Economic distress is mounting as a result of the coronavirus crisis and it is critical to find ways to provide support for those most in need. For the past several decades, our safety net has primarily been aimed at promoting and rewarding work and has provided relatively little assistance for low-income families that are not employed. This means that some of the key programs in the social safety net are not structured to provide poverty relief during times when unemployment is rising rapidly and increasing hardship for families. Which programs are able to provide the greatest support in the context of the record-shattering unemployment levels due to the COVID-19 crisis? And how are they likely to respond?

Changing work patterns among SNAP recipients and CARES Act provisions may help channel more assistance benefits to the lower-income population.

The Facts:

  • As the economic impact from the COVID-19 pandemic and record-shattering unemployment mount, measures of food insecurity provide a window into the growing need being experienced by American households. The U.S. Department of Agriculture defines food insecurity as a "household-level economic and social condition of limited or uncertain access to adequate food," which is measured by asking respondents whether a series of statements have been true for them over the past 12 months. One of those statements is: "The food that we bought just didn’t last, and we didn’t have money to get more." In good economic times over the past two decades, about 12 percent of all families and 16 percent of families with children have answered that it was often or sometimes true that their food didn’t last. During the Great Recession, those numbers jumped to 16 and 21 percent, respectively, remained elevated for several years, and then declined to pre-recession levels by 2018, the last year USDA data are publicly available. However, a nationally representative survey designed to provide real time measures of the pandemic's impact asked the same question about food availability in April 2020. The results indicate that 23 percent of all families and 34 percent of families with children reported that it was often or sometimes true that their food didn’t last. 
  • The existing U.S. safety net is primarily aimed at promoting and rewarding work and provides relatively little assistance for low-income families that are not employed. Fundamental changes have occurred in the social safety net for children in the past 25 years with policies to address poverty increasingly centering on the importance of paid work. Welfare reform in the 1990s dramatically reduced the availability of cash assistance and focused on work requirements and time limits. At the same time, the Earned Income Tax Credit (EITC), which increases the after tax income for those working near the bottom of the wage distribution, expanded substantially and became one of the most important anti-poverty programs in the country. Recently, proposals to require work for those receiving a variety of benefits, including Medicaid, SNAP, and public housing, continue this employment focus. The limitations of the safety net became apparent during the Great Recession when households were not fully insured against economic distress, in spite of increasing participation in several safety net programs. 
  • The two programs that typically provide the greatest support in troubled economic times are the Supplemental Nutrition Assistance Program (SNAP – formerly known as Food Stamps) and the Unemployment Insurance (UI) system. SNAP provides benefits to low-income families that can be used to purchase food at most grocery stores, while unemployment insurance provides cash payments that replace a portion of lost earnings for those who have lost their jobs. During the Great Recession, UI and SNAP were the two programs that were most responsive — expanding in enrollment and expenditures as the economy deteriorated. While SNAP is targeted at the lower-income population, UI provides less assistance to those in poverty because benefits are proportional to earnings. For this reason, the two programs have tended to serve different populations: At its height in 2010 during the Great Recession we estimate that only 7 percent of (non-elderly and non-disabled) SNAP recipients collected UI, receiving an average of a little over $200 per week. 
  • Changing work patterns among SNAP recipients and CARES Act provisions may help channel more assistance benefits to the lower-income population than during the Great Recession. The employment rates of SNAP recipients have been increasing. Between 1996 and 2017, the percentage of SNAP recipients with children who are also working has risen from 35 to 61 percent. Their increased rate of employment means that more SNAP recipients will also satisfy the earnings requirements of unemployment insurance and qualify for UI benefits. Traditionally, benefit levels are calculated at roughly half of pre-unemployment wages, a small amount for a low-wage worker. But the CARES Act increases that benefit by $600 per week through the end of July, triple their average benefit level otherwise. 
  • Our analysis suggests that around 40 to 50% of current SNAP recipients may also be able to benefit from unemployment insurance. Those SNAP recipients with a sufficient work history may now qualify for substantial UI benefits. Whether work history is “sufficient” is a complicated definition that varies by state. As a reasonable approximation, workers are likely to satisfy these requirements if they worked for 26 or more weeks in the past year and earned over $5,000. We used data from the 2019 Annual Social and Economic Supplement to the Current Population Survey, which provides income and program participation information for the 2018 calendar year, for over 100,000 individuals. We focus on those who were between the ages of 18 and 64, distinguishing those who have children under the age of 18 living in their households. We then select those individuals who report that they received SNAP in 2018. For that population, we simulate the likelihood that they would qualify for UI based just on their earnings and weeks worked in that year. The results of this exercise indicate that 39 percent of these SNAP recipients and 51 percent of those with children would be eligible for UI if just the work history test was used to determine eligibility — an increase of around 5 percentage points relative to similar calculations during the Great Recession. 
  • Emerging data indicates that many SNAP recipients already have applied for or are receiving UI during the crisis — although the unprecedented increase in need presents formidable challenges to agencies processing the applications. New evidence from the COVID19 Impact Survey –a recently launched data collection effort to obtain real-time data on U.S. households during the pandemic – indicates 14.8 percent of respondents received SNAP (10 percent), UI (4.7 percent), or both in the prior week. Another 18 percent of respondents either applied or tried to apply for SNAP, UI or both. A substantial share of current SNAP participants received or applied for UI benefits: Among current SNAP participants, 8.6 percent also received UI benefits in the prior week; another 12.5 percent applied for UI and 9 percent reported that they tried to apply for UI. The greater number of respondents applying for SNAP and UI relative to those actually receiving benefits reflects the difficulty agencies face processing applications in the face of a historical spike in demand. Outdated technology and difficulties raised by social distancing are contributing to this problem. Some changes are being made, though, to help facilitate the process. For instance, the USDA is automatically renewing existing SNAP cases.

What this Means:

Many Americans are now facing extensive economic hardship and finding ways to mitigate this problem is a policy imperative. Lower-income families who are already struggling are particularly in peril due to widely documented shortcomings of the safety net during recessions; a spike in food insecurity highlights the concern. The main features of the CARES Act do not directly target income support to low-income families during the crisis. Our analysis suggests that a sizable share of current SNAP recipients who have lost their jobs may be able to obtain unemployment insurance benefits — increasing the avenues for assistance to low-income families. Even though in the past unemployment insurance has not been a commonly used resource for the SNAP population, its use should be promoted now. Given the dramatic increase in hardship, the extent to which SNAP and unemployment insurance together will be able to shelter families from economic distress remains an open question. Moreover, despite the increase in eligibility for unemployment benefits among the SNAP population, at least half of SNAP recipients are still unlikely to receive any assistance from unemployment insurance.

Topics:

Coronavirus / Social Safety Net
Written by The EconoFact Network. To contact with any questions or comments, please email [email protected].
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