WV Center on Budget and Policy > Blog > Economy > Recovery Act Reduced Poverty in 2009

Recovery Act Reduced Poverty in 2009

Earlier this week, the Census Bureau released the 2009 data from the American Community Survey, which we have a summary for West Virginia here. The poverty rate in West Virginia increased from 16.9% in 2007, before the recession, to 17.7% in 2009. This increase, while not good, is not as much as one would expect considering we were in the midst of the worst recession since the 1930s. West Virginia lost about 30,000 jobs, the unemployment rate more than doubled, and real wages declined by a total of $246 million, but the increase in poverty was statistically insignificant.

 So why did the recession have a relatively small effect on poverty in West Virginia? Poverty is measured using income thresholds that vary by family size and composition. And in West Virginia, transfer payments make up a significant portion of personal income in the state. This is due to a couple of reasons, mainly than West Virginia has an older population, drawing on Social Security and Medicare benefits.
 
Transfer payments were the key targets of several provisions of the Recovery Act (ARRA or the stimulus bill). These provisions included additional weeks of emergency unemployment compensation, extending the period from 26 weeks to 99 weeks (and benefiting thousands of West Virginians), an additional $25 per week for unemployed workers to supplement their benefits, additional food stamp assistance, and a one time $250 payment to those who receive Social Security, SSI, or veteran’s benefits. These were in addition to other provisions like the new Making Work Pay tax credit and expanded Child and Earned Income Tax Credits, and the normal levels of transfers.
 
These provisions had a clear and measurable effect on West Virginians. Between 2008 and 2009 unemployment compensation increased by $285 million, Social Security benefits increased by $465 million, and SSI benefits increased by $44 million. These increases helped West Virginians’ income from falling dramatically in the recession, and likely kept thousands from falling into poverty. In fact, recent analysis has shown that unemployment insurance kept 3.3 million people out of poverty nationwide.
 
That’s not to say that poverty isn’t a problem, and now that the recession appears to be over we can forget about it and move on. Despite the Recovery Act and other policy actions, the recession still pushed over 12,000 West Virginians into poverty in 2009, and over 310,000 people in West Virginia are living in poverty. Economic growth has been sluggish and jobs have been slow to return. Without further action, those living in poverty may become trapped.

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