On New Year’s Eve, as the curtain closed on what, for those lucky enough to have survived it, was one of the worst years in living memory, I noted that 2020 was an especially good year to be rich.
Of course, outside of peasant revolts (exceedingly rare events in modernity), there aren’t all that many “bad” years to be wealthy. It’s true that being rich doesn’t guarantee you’re going to a have a “good” year, depending on your definition of “good.” And, to be sure, the late Christopher Wallace was onto something when he famously proclaimed: “Mo’ money, mo’ problems.”
But in 2020, the 20 richest people on the planet saw their combined net worth rise by more than a half-trillion dollars at a time when nearly 2 million people perished in a pandemic that plunged the global economy into the worst downturn since the Great Depression.
At the very least, we can say that it was better to be rich in 2020 than to be poor. I’m confident that Wallace would agree, were he alive to speak to the issue.
One can say the same things, only in reverse, about poverty. That is: There’s never really a “good” year to be poor. It’s true that money can’t buy happiness and, as Terrence LeVarr Thornton, one the few people with a claim on being more talented than the above-mentioned Wallace, once put it, “Ask Steve Jobs, wealth don’t buy health.” But in some cases, money does buy a measure of happiness. Similarly, wealth does, in fact, buy health, in all but the most acute circumstances. (Unfortunately for the world, Jobs found himself in circumstances so acute that money simply wasn’t sufficient to solve the problem.)
We know how the rich fared in 2020. They became vastly richer. But what of the poor?
Well, they generally became poorer, because that’s how it works, both in an anecdotal sense and, if you believe Thomas Piketty’s simple equation, in a mathematical sense as well, as long as the rate of return on capital exceeds the rate of growth.
If you’re interested in the specifics for the US, Economists Bruce Meyer, from the University of Chicago, and James Sullivan, of Notre Dame, quantified the increase in the poverty rate during the back half of 2020. The results aren’t good. Below is the crucial excerpt from “Real-time Poverty Estimates During the COVID-19 Pandemic through December 2020”:
Our initial study provided estimates through June 2020. Our initial results showed that poverty declined in the first few months after the start of the pandemic. The poverty rate fell by 1.5 percentage points from 10.8% in January 2020 to 9.3% in June 2020. We also showed that poverty declined across a range of demographic groups and geographies, with some of the most noticeable declines evident for people with low levels of education and for those who fall into the “other race” (neither white nor Black) category. Poverty has risen sharply, however, in recent months as some of the benefits that were part of the government relief package have expired. Poverty rose by 2.4 percentage points (after rounding) from 9.3% in June to 11.8% in December, adding 8.1 million people to the ranks of the poor. Poverty has risen each month since June, even though the unemployment rate has fallen by 40% (from 11.1% to 6.7%) over this period. This disconnect between poverty and unemployment is not surprising given that some government benefits have expired, unemployment insurance benefits are typically only about half of pre-job loss earnings, and five million people have left the labor force in the past year and therefore are not counted as unemployed. Despite the decline early in the pandemic, poverty is now higher than it was at the start of the year.
It doesn’t get much more straightforward than that.
For what it’s worth, the last official read on the poverty rate from the Census Bureau (for 2019) was 10.5%. Although I’m told facts stopped being facts in 2017, I’m reasonably sure that 11.8% is still a larger number than 10.5%. Similarly, I’m confident Meyer and Sullivan are correct to say that 11.8% is larger than 9.3%. The rest of their math seems to check out too.
I jest. Except that it’s not funny. Because we’re talking about poverty. And mass joblessness.
In fairness, if the official rate for 2020 were to register exactly 11.8%, that would just put it back to where it stood in 2018, when it was on a downward trajectory. As the Census Bureau recounted, while documenting 2019’s figures, “since 2014, the poverty rate has fallen 4.3 percentage points, from 14.8% to 10.5%.”
But, what’s particularly notable about the visual (above) is the extent to which it shows the federal government has the capacity not just to cushion the blow from a severe shock, but in fact to drive poverty rates sharply lower during the worst economic conditions imaginable.
“The entire decline in poverty through June can be accounted for by the one-time stimulus checks the federal government issued, predominantly in April and May, and the expansion of unemployment insurance eligibility and benefits,” Meyer and Sullivan wrote. “In fact, in absence of these programs, poverty would have risen sharply.”
That raises a variety of questions, not least of which is simply this: Why stop now?
Not surprisingly, the increase in poverty over the past several months has fallen disproportionately on African Americans, those without a college degree, and children, Meyer and Sullivan went on to say.
For what it’s worth, the total cost of $2,000 stimulus payments would be somewhere in the neighborhood of $450 billion. So, $100 billion less than the 20 richest people on the planet gained on paper last year.