Early withdrawal of pandemic unemployment insurance: Effects on employment and earnings
BibTeX
Google scholar cite for AEA version:
@inproceedings{coombs2022early,
title={Early withdrawal of pandemic unemployment insurance: Effects on employment and earnings},
author={Coombs, Kyle and Dube, Arindrajit and Jahnke, Calvin and Kluender, Raymond and Naidu, Suresh and Stepner, Michael},
booktitle={AEA Papers and Proceedings},
volume={112},
pages={85--90},
year={2022},
organization={American Economic Association 2014 Broadway, Suite 305, Nashville, TN 37203}
}
And for pdf version:
@book{coombs2022early,
title={Early withdrawal of pandemic unemployment insurance: Effects on earnings, employment and consumption},
author={Coombs, Kyle and Dube, Arindrajit and Jahnke, Calvin and Kluender, Raymond and Naidu, Suresh and Stepner, Michael},
year={2022},
publisher={Harvard Business School}
}
Abstract
From the AEA version:
We examine the effects of the sudden withdrawal of expanded pandemic unemployment benefits in June 2021 using anonymized bank transaction data for 16,253 individuals receiving unemployment insurance (UI) in April 2021. Comparing the difference-in-differences between states withdrawing and retaining expanded UI, we find that UI receipt falls 36.3 p.p., while employment rises by only 6.8 p.p. by early September. Average cumulative UI benefits fall by $2,529, while average cumulative earnings increase by only $292. Heterogeneity by unemployment duration implies that these effects are primarily driven by extensive margin expiration of benefits rather than by intensive margin reductions in the benefit level.
From the pdf version (early version of paper, I think?)
In June 2021, 22 states ended all supplemental pandemic unemployment insurance (UI) benefits, eliminating benefits entirely for over 2 million workers and reducing benefits by $300 per week for over 1 million workers. Using anonymous bank transaction data and a difference-indifferences research design, we measure the effect of withdrawing pandemic UI on the financial and employment trajectories of unemployed workers in states that withdrew benefits, compared to workers with the same unemployment duration in states that retained these benefits. In our data through August 6, we find that ending pandemic UI increased employment by 4.4 percentage points while reducing UI recipiency by 35 percentage points among workers who were unemployed and receiving UI at the end of April 2021. Through the first week of August, average UI benefits for these workers fell by $278 per week and earnings rose by $14 per week, offsetting only 5% of the loss in income. Spending fell by $145 per week, as the loss of benefits led to a large immediate decline in consumption.
Notes and Excerpts
Our de-identified transaction-level data comes from Earnin, a financial services company that provides users with products such as access to their income before their payday. These users are predominantly low-income workers with low access to credit.
our sample is composed entirely of low-income and credit-constrained workers who are likely to respond more strongly to a loss of benefits than higher-income workers affected by the same policy
- Of the 26 states announcing a withdrawal, 22 withdrew in June 2021.
- 16 of the June withdrawal states in their sample additionally ended the PUA and the PEUC
our evidence suggests that most of the employment gains were due to the mechanical exhaustion of UI benefits, as opposed to through greater incentives for job finding from the loss of $300/week supplement
Looks at new job finding, not overlap between UI and employment, it seems.
For workers who lost all UI benefits in June (meaning their UI spell started February or earlier), job finding rates rose by 26 percent. In contrast, consider the workers who lost their job in May. For them, the earlier end of the program only results in a loss of 300 dollars. The duration of their benefits at that point would be the same with or without the pandemic extension. Their estimate of the effects of job-finding for the May-job-loss-cohort was close to zero and not significant. (Really close to zero, looking at the Figure.)
These findings suggest that the impact of removing the $300/week supplement per se played a small role in explaining the job gains, which seem to have been driven largely by benefit exhaustion.
More jobs, but overall reduced spending.