Direct Cash Benefits during the Pandemic: Spending, saving and returning to work
As the country looks to emerge from the pandemic during a destabilized labor market, a debate has arisen over whether direct cash payments discourage people from working. This debate echoes long-standing ideological disputes over the effectiveness and appropriateness of direct cash benefits, and whether people will spend them wisely. In this report, we draw on qualitative data from the Poverty Tracker to better understand how the COVID relief benefits impacted peoples’ lives and the choices they made. We captured people’s experiences with successive waves of stimulus payments and unemployment insurance benefits, their spending of these benefits, and their efforts to return to work (or not) over time.
The significant expansion of cash benefits provided through the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act appears to have forestalled a devastating increase in the poverty rate between 2019 and 2020. We find that direct cash payments were the single most useful tool for helping people ride out the pandemic and were first and foremost, used to cover basic needs, including rent or mortgage payments, utilities, and food. It made the difference in being able to pay the bills if a parent was suddenly homebound with school-aged children. It also enhanced peoples’ financial management strategies by allowing them to better manage credit card use and debt and savings.
We also find that while New Yorkers put their COVID-relief benefits to good use, they did not substitute for work. Rather the benefits helped people secure their current, and even future, economic survival while they figured out when and how, and not if, to return to work.
In the News: COVID Cash Assistance Helped 1 Million New Yorkers Avoid Poverty, Report Finds
The Poverty Tracker is a longitudinal study of the dynamics of poverty and disadvantage in New York City. It is a joint project of Robin Hood and Columbia University.