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Spotlight on Direct Cash Benefits during the Pandemic

October 4, 2021

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 social safety net, including the effectiveness and appropriateness of direct cash benefits, and whether people will spend them wisely. The existing quantitative data demonstrates that the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including its direct cash benefit provisions, helped many people avert material hardship, while for those who were ineligible, its absence exacerbated hardship.Previous Poverty Tracker reports have shown that nearly half (49%) of all New York City workers lost employment income at the height of the COVID-19 pandemic. And those hardest-hit were those already in precarious financial positions, with more than half (57%) of low-wage workers in New York City losing employment income. Across the city, New Yorkers were forced to figure out how to pay rent and keep food on the table with no sense of what was to come next. To make ends meet, 52% of New Yorkers who lost employment income drew down from their savings accounts, 41% started using their credit cards more frequently, and 29% delayed payments on credit cards and other loans. But the data also show that it could have been much worse absent policy interventions, such as the stimulus checks and expanded unemployment insurance benefits (UIB) that so many New Yorkers describe as a lifeline in the qualitative interviews discussed in the pages that follow.In this report, we draw on qualitative data from the Poverty Tracker to better understand how these benefits impacted peoples' lives and the choices they made. We conducted a rolling set of interviews with 38 adults in New York City from July 2020 through May 2021. With some exceptions, we interviewed people twice at roughly six-month intervals. Our research design therefore allows us to track people's experiences with successive waves of stimulus payments and UIB, their spending of these benefits, and their efforts to return to work (or not) over time. We first describe how people budgeted and apportioned these benefits. We next examine whether and how direct cash benefits affected decision-making about employment.