COVID-19 exacerbates poverty

The economic downturn of the COVID-19 pandemic has disproportionately hurt those in the most vulnerable groups and those struggling with economic hardships even before the pandemic hit. That’s likely the case for Nome and the surrounding region as well, and the real impact of COVID-19 on local poverty will likely last long after the pandemic is over.

The poverty rate for the Nome Census Area, which includes Nome and the fifteen villages Nome serves as a hub for, was 22 percent in 2019. That’s more than twice the national poverty rate, which was 10.5 percent the same year.

Poverty in the region is the result of a number of factors, including the lack of economic growth and lack of available jobs.

Mark Berman, an economist with the Institute of Social and Economic Research at the University of Alaska Anchorage, said the actual poverty rate is tricky to pin down and is likely much higher. For one, the region’s population is so small that it can be difficult to get accurate data. National poverty rates are updated regularly by the Census Bureau’s Current Population Survey, a monthly survey conducted for the Bureau of Labor Statistics. That survey only includes around 200 Alaskan households, Berman said, so extrapolating regional information is next to impossible. Once a year, the American Community Survey, ACS for short, aims to get a more detailed picture of poverty, among other things, and that’s the survey that’s useful in measuring poverty rates for specific areas. One of the main issues with the ACS poverty rate, though, is that it doesn’t take into consideration the cost of living in a certain area. It’s only a function of income and family size, and so it tends to undercount real poverty in areas where the cost of basic supplies like food and fuel is high.

In rural Alaska, where transportation expenses on basic goods make the costs of living some of the highest in the country, “the poverty rates are obviously way understated,” Berman said.

To make things more complicated, the official poverty rate also doesn’t consider Permanent Fund Dividend income from children, which for some regional households is a significant source of cash. It also doesn’t take into account the availability of subsistence resources that so many residents of rural Alaska rely on, which fluctuate due to environmental changes more than the market economy.

All in all, Berman said poverty rates in rural Alaska are not really measured in exact numbers by economists. But what they can do is compare official poverty rates from year to year and determine if areas are doing better or worse than in the past.

The numbers for 2019 are only just now coming out, and with the Census Bureau preoccupied with the 2020 Census, Berman said he didn’t expect 2020’s numbers to be available for more than a year.

So, the impact of COVID-19 on regional poverty is difficult to assess, but Berman said the residual economic effects would be with us for some time.

“A lot of that is going to be delayed. That’s why, even if we have a vaccine and a lot of people get it and we’re back to work by the end of 2021, there’s still going to be a lot of financial hardship,” he said.

Businesses that have closed will take time to reopen, and banks will need time before they can give out loans again. “So there’s no way we can recover right away to where we were in 2019,” Berman said. “It’s not going to happen.”

“It’s going to be a slog. I don’t have any data, but it’s no doubt that poverty rates are going to be higher and remain high for a while,” he added.

One way to infer the pandemic’s effect on poverty in the shorter term is to look at unemployment claims, since there is often significant overlap between those filing for unemployment and those struggling with poverty.

According to data from the Alaska Department of Labor and Workforce Development, there were 404 unemployment claims from the Nome Census Area in October 2020. That’s a whopping 251 percent more claims than in October 2019.

In June, there were 531 claims, although the larger number is partially due to seasonal variation. In fact, the percent change from the same time last year was 195 percent in June.

While the Pandemic Emergency Unemployment Compensation, a piece of the federal CARES Act, provides up to 13 weeks of additional aid for those who have exhausted their unemployment benefits, it officially ends at the end of December with the rest of the CARES programs, potentially sending even more people around the country and in Alaska into poverty.

A bipartisan working group including Alaska Senator Lisa Murkowski has proposed a framework for extending federal economic relief into 2021, a bill that has yet to be passed.

In the meantime, the ongoing pandemic continues forcing businesses to close and unemployment benefits to run dry, likely hurting the region’s poorest even after a vaccine is distributed and infection rates slow down.