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Employment Effects of Unemployment Insurance Generosity During the Pandemic

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  • Scott, Dana
  • Finamor, Lucas

Abstract

In response to the Covid-19 pandemic, the United States enacted the CARES Act, which expanded unemployment insurance (UI) benefits by providing a $600 weekly payment in addition to state unemployment benefits. We test whether changes in UI benefit generosity are associated with decreased employment, both at the onset of the benefits expansion and as businesses began to reopen. We use data from Homebase, a private firm that provides scheduling and time clock software to small businesses, which allows us to exploit high-frequency observations to understand how firms and workers respond to policy changes in real time. While our results show that relative declines in employment and hours occurred in mid-March, we find that the workers with higher post-CARES replacement rates did not experience larger declines in employment or hours of work when the benefits expansion went into effect. They have also returned to their previous jobs over time at similar rates as others.

Suggested Citation

  • Scott, Dana & Finamor, Lucas, 2020. "Employment Effects of Unemployment Insurance Generosity During the Pandemic," MPRA Paper 102390, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102390
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    References listed on IDEAS

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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic policy > Household support > Unemployment insurance
    2. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic consequences > Employment and Work

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    Cited by:

    1. Nicolas Petrosky-Nadeau & Robert G. Valletta, 2021. "UI Generosity and Job Acceptance: Effects of the 2020 CARES Act," Working Paper Series 2021-13, Federal Reserve Bank of San Francisco.
    2. Corina Boar & Simon Mongey, 2020. "Dynamic Trade-offs and Labor Supply Under the CARES Act," NBER Working Papers 27727, National Bureau of Economic Research, Inc.
    3. Guido Matias Cortes & Eliza Forsythe, 2023. "Distributional impacts of the Covid-19 pandemic and the CARES Act," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 325-349, June.
    4. Joshua Rosenberg & Ilan Strauss & Gilad Isaacs, 2021. "COVID‐19 impact on SADC labour markets: Evidence from high‐frequency data and other sources," African Development Review, African Development Bank, vol. 33(S1), pages 177-193, April.
    5. Chatterji Pinka & Li Yue, 2023. "Recovery from the COVID-19 Recession: Uneven Effects among Young Workers?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(3), pages 821-842, July.
    6. Ganong, Peter & Noel, Pascal & Vavra, Joseph, 2020. "US unemployment insurance replacement rates during the pandemic," Journal of Public Economics, Elsevier, vol. 191(C).
    7. Granja, João & Makridis, Christos & Yannelis, Constantine & Zwick, Eric, 2022. "Did the paycheck protection program hit the target?," Journal of Financial Economics, Elsevier, vol. 145(3), pages 725-761.
    8. Guido Matias Cortes & Eliza C. Forsythe, 2020. "Impacts of the Covid-19 Pandemic and the CARES Act on Earnings and Inequality," Upjohn Working Papers 20-332, W.E. Upjohn Institute for Employment Research.
    9. Afridi, Farzana & Mahajan, Kanika & Sangwan, Nikita, 2021. "Employment Guaranteed? Social Protection during a Pandemic," IZA Discussion Papers 14099, Institute of Labor Economics (IZA).
    10. Juan Laborda & Pilar Rivera-Torres & Vicente Salas-Fumas & Cristina Suárez, 2021. "Is there life beyond the Spanish government’s aid to furloughed employees by COVID-19?," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-21, June.
    11. Marinescu, Ioana & Skandalis, Daphné & Zhao, Daniel, 2021. "The impact of the Federal Pandemic Unemployment Compensation on job search and vacancy creation," Journal of Public Economics, Elsevier, vol. 200(C).
    12. Richard V. Burkhauser & Kevin Corinth & Douglas Holtz-Eakin, 2021. "Policies to Help the Working Class in the Aftermath of COVID-19: Lessons from the Great Recession," The ANNALS of the American Academy of Political and Social Science, , vol. 695(1), pages 314-330, May.
    13. Joseph E. Stiglitz, 2020. "The Pandemic Economic Crisis, Precautionary Behavior, and Mobility Constraints: An Application of the Dynamic Disequilibrium Model with Randomness," NBER Working Papers 27992, National Bureau of Economic Research, Inc.
    14. Christina D. Romer & David H. Romer, 2022. "A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay," Journal of Economic Perspectives, American Economic Association, vol. 36(2), pages 3-28, Spring.
    15. Arindrajit Dube, 2021. "Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation," NBER Working Papers 28470, National Bureau of Economic Research, Inc.
    16. Eliza Forsythe & Lisa B. Kahn & Fabian Lange & David G. Wiczer, 2020. "Searching, Recalls, and Tightness: An Interim Report on the COVID Labor Market," NBER Working Papers 28083, National Bureau of Economic Research, Inc.
    17. Faria-e-Castro, Miguel, 2021. "Fiscal policy during a pandemic," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    18. Harry J. Holzer & Glenn Hubbard & Michael R. Strain, 2024. "Did pandemic unemployment benefits increase unemployment? Evidence from early state‐level expirations," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 24-38, January.
    19. Huixin Bi & Chaitri Gulati, 2021. "Fiscal Relief during the COVID-19 Pandemic," Economic Review, Federal Reserve Bank of Kansas City, vol. 106(no.2), pages 5-24, July.

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    More about this item

    Keywords

    Unemployment Insurance; Employment; COVID-19; CARES Act;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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