From 2008 to 2010, employment and earnings declined in the nation and New York City.  Federal and local policy makers responded with three major initiatives that directly bolstered the purchasing power of families: an extension of the duration and increased generosity of Unemployment Insurance; the creation of new and expansion of existing tax credits; and greater outreach and higher benefits levels for the Food Stamp program. This paper explores the extent to which these efforts ameliorated a rise in poverty during the Great Recession and its aftermath.

We apply a methodology developed by the National Academy of Sciences to construct a poverty measure for New York City, the CEO poverty measure.  The measure includes tax credits and the value of in-kind benefits as resources available to families to meet their needs.  We identify the effectiveness of the new tax and Food Stamp policies by comparing a poverty rate that accounts for the full effect on income from these programs against a hypothetical poverty rate that simulates what would have happened absent the recent initiatives that expanded them.

We find that the CEO poverty rate was statistically unchanged from 2008 to 2009 when fully accounting for the anti-recessionary policy response.  Declines in employment continued into 2010, however.  And, unlike 2009, there were no new federal initiatives to offset the loss of earned income.  As a result, the poverty rate rose by 1.2 percentage points from 2009 to 2010, reaching 21.0 percent.  This does not mean that the new initiatives had no effect.  We find that the CEO poverty rate would have risen much more dramatically in their absence.  Our simulated poverty rate reaches 23.7 percent in 2010.

A second part of the paper focuses on, persons living in families with children.  This group was specifically targeted by the expansion of the tax credit programs. The initiatives have a large impact, but did not fully offset the loss of earned income for these families.  The CEO poverty rate that fully accounts for the initiatives rose by 2.0 percentage points from 2009, to 23.0 percent in 2010.  Absent the tax and Food Stamp initiatives their CEO poverty rate would have jumped to 27.6 percent in 2010. 

We find that families with children appear to be particularly vulnerable to economic contractions.  First, they are highly dependent on earned income and to work-conditioned tax credits.  Second, a relatively larger share of them live just over the CEO poverty threshold.  Employment declines push families of all kinds down the economic ladder.  But families with children are in greater danger than others of being knocked down the rung on the ladder that represents the poverty threshold.

We conclude with policy implications.  One question raised by our findings is how policymakers can best maintain parents’ connection to employment and work-conditioned tax credits during extended periods of labor market weakness.  A second is what else, given current fiscal and political realities, should be done to supplement the income or defray the cost of parenting for families with children.