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Economists Find No Evidence That Enhanced Jobless Reduced Employment

A new report supported by Yale’s Tobin Center for Economic Policy, addresses concerns that the more generous unemployment benefits, which provide $600 per week above state unemployment insurance payments, would disincentivize work.

The researchers assessed this claim using weekly data from Homebase, a company that provides scheduling and timesheet software to small businesses throughout the United States. The findings suggest that, in the aggregate, the expanded benefits neither encouraged layoffs during the pandemic’s onset nor deterred people from returning to work once businesses began reopening.

The enhanced unemployment benefits were initiated under the CARES Act, a $2.2 trillion economic stimulus package enacted on March 27 that attempted to ease the pandemic’s severe economic consequences. The expanded benefits, which are set to expire July 31, provide a $600 weekly payment in addition to any state unemployment insurance. The supplemental payment was designed to cover 100% of the average U.S. wage when combined with existing unemployment benefits. The generosity of an individual’s unemployment benefits depends on several factors, including their earnings history and their state’s schedule of benefits.

The report found that workers receiving larger increases in unemployment benefits experienced very similar gains in employment by early May relative to workers with less-generous benefit increases. People with more generously expanded benefits also resumed working at a similar or slightly quicker rate than others did, according to the report.

Critics argued that the expanded benefits, which exceeded many people’s normal weekly wages, would incentivize businesses to lay off workers to cut costs and disincentivize recipients from returning to work. If the enhanced benefits had these effects, the researchers said, the data should show a significant drop in employment in the week after the CARES Act took effect; it should also show subsequent decreases in relative employment as workers with more generous unemployment benefits put off returning to work. The data did not yield results that support these predictions.

The researchers found no evidence that recipients of more generous benefits were less likely to return to work. They also found that workers who received larger increases in their unemployment benefits relative to their wages did not experience greater declines in employment after the CARES Act was enacted.

The full report is available here.