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Why US poverty hasn't spiked during Covid-19 — yet

Before we get into links this week, a quick housekeeping note: The Future Perfect newsletter will shift into summer mode starting this week — we'll send it once a week instead of twice a week throughout the summer. We'll be back to our normal twice-a-week schedule after Labor Day.

 

Thanks for reading, and hope you're all able to take it a bit easier this summer as well!

 

1) Considering how little the US Congress has actually achieved in the past decade-plus, here's a takeaway that's a bit of a shocker:  The CARES Act, the $2 trillion coronavirus economic rescue package that passed Congress at the end of March is, quite possibly, one of the most progressive, highest-impact spending bills Congress has ever passed.

 

Jason DeParle, the dean of poverty reporting in the US press corps, has come out with a story putting some hard numbers on the CARES Act's humanitarian impact.

 

DeParle looks at data from two research groups that have tried to estimate how poverty rates have evolved since the coronavirus pandemic hit.

 

Zachary Parolin, Megan A. Curran, and Christopher Wimer of the Center on Poverty and Social Policy, based at Columbia, found that poverty rose an almost imperceptible amount, from 12.5 percent of the population to 12.7 percent between 2019 and 2020. But without CARES, it would have risen to 16.3 percent, resulting in almost 12 million more people being in poverty. The reductions were concentrated disproportionately among Hispanic and black households.

 

The second group — the veteran poverty research duo Bruce Meyer of UChicago and James X. Sullivan of Notre Dame, collaborating with UChicago scholar Jeehoon Han — found that in April and May, the estimated poverty rate covering the previous 12 months was 8.6 percent, compared to 10.9 percent in January and February, suggesting that poverty actually fell after the pandemic hit due to the overwhelming federal response.

 

The two studies use slightly different methodologies. The Columbia researchers use monthly survey data for April from the US Census and project the annual poverty rate for 2020 based on that one month; they also model how poverty would look under different policy schemes.

 

Han, Meyer, and Sullivan, by contrast, use both April and May survey results, specifically a rarely used question about annual family income that's asked in the monthly surveys; to assess the cumulative impact of the coronavirus and CARES Act, they compare January and February data to April and May data.

 

They also emphasize different aspects of the recovery package in explaining the CARES Act's effect on poverty. The Columbia study in particular highlights the role of the $600-a-week boost to unemployment benefits.

 

Among individuals who lost their jobs, and did not receive UI benefits, the other measures in the CARES Act (principally the $1,200 checks) reduced poverty from 35.1 percent to 30.2 percent, the paper finds.

 

But among jobless individuals who did get UI benefits, the CARES Act reduced the poverty rate from 19.5 percent to 6.4 percent, less than the rate among employed individuals. (The higher pre-CARES poverty rate in the former group reflects that many of those not eligible for UI benefits were unauthorized immigrants, who are lower-income in general.)

 

The Han, Meyer, and Sullivan paper finds that both stimulus checks and UI benefits were important and is slightly more positive on the former. If you exclude the $1,200 checks, the poverty rate in May is 1.3 points higher, they find, while if you exclude UI benefits, it's only 0.7 points higher.

 

Overall, though, they're similar papers with similar conclusions: Both the stimulus checks and UI benefits helped tremendously in keeping low-income people afloat during the pandemic.

 

That makes the fact that the UI benefits expire at the end of July especially concerning. Given how weak the economy remains, and how closed down most states still are, extending UI benefits seems to be in order. Here's one clever plan, from Penn's Ioana Marinescu, on how to do that.

 

2) President Trump on Monday signed a proclamation pausing the H-1B visa program, among other work visa programs, through the end of 2020, the latest salvo in his war on legal immigration. (See our own Nicole Narea's explainer here.) 

 

It's worth emphasizing that on a number of issues Future Perfect cares about — fostering scientific progress, increasing economic growth, improving welfare for people from developing countries — this would be a disaster.

 

H-1B is hardly a perfect program; it tethers workers too tightly to specific employers, which can make it hard for workers to advocate for themselves. One anonymous H-1B worker recently told the tech publication OneZero, "I believe that H-1B employees tend to tolerate more bullshit from managers because they cannot move to another company that easily, and they cannot just rage-quit."

 

We also keep an arbitrary per-country cap on which H-1B recipients can get green cards, which tends to hurt visa holders from very populous countries like India and China. (74.5 percent of H-1B petitions are for workers from India, and 11.8 percent from China, with all other countries contributing 1 percent or less.)

 

But overall, the effects of the program are immensely positive. In 2016, the average H-1B visa holder earned $80,000, per Pew Research Center (the median salary has gotten even higher under Trump as he gets more restrictive in issuing visas). It's hard to get good data on, say, software engineer salaries in India, but a report from the company Payscale suggests that 1 million rupees (or about $13,200) is a high upper limit. These workers clearly gain tremendously from working in the US instead.

 

The effects for productivity, and for native workers, seem positive too. H-1B lottery winners seem to receive more venture capital funding and patents. Cities with more foreign-born STEM workers due to H-1B visas seem to have higher wages for college-educated native workers as well. While at the firm level, companies with more H-1Bs appear to hire fewer native workers (a fact that immigration skeptics have used to bash the program), that doesn't seem true at a regional level. Noah Smith has a number of great columns on this for Bloomberg.

 

So a pause on H-1B visas seems like a purely negative-sum exercise. Unfortunately, Trump's immigration policy seems driven more by a desire to own the libs (and the immigrants) than to boost growth or improve the well-being of native workers.

 

—Dylan Matthews

 

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