Earnings Shocks and Stabilization During COVID-19

34 Pages Posted: 2 Jul 2021

See all articles by Jeff Larrimore

Jeff Larrimore

Board of Governors of the Federal Reserve System

Jacob Mortenson

Joint Committee on Taxation, US Congress

David Splinter

Joint Committee on Taxation

Multiple version iconThere are 2 versions of this paper

Date Written: June 29, 2021

Abstract

This paper documents the magnitude and distribution of U.S. earnings changes during the COVID-19 pandemic and how fiscal relief offset lost earnings. We build panels from administrative tax data to measure annual earnings changes. The frequency of earnings declines during the pandemic were similar to the Great Recession, but the distribution was very different. In 2020, workers starting in the bottom half of the distribution were more likely to experience large annual earnings declines and a similar share of male and female workers had large earnings declines. While most workers experiencing large annual earnings declines do not receive unemployment insurance, over half of beneficiaries were made whole in 2020, as unemployment insurance replaced a median of 103 percent of their annual earnings declines. After incorporating unemployment insurance, the likelihood of large earnings declines among low-earning workers was not only smaller than during the Great Recession, but also smaller than in 2019.

Keywords: COVID-19, wage earnings, stimulus checks, unemployment insurance, countercyclical policy

JEL Classification: D31, E24, H53, J30, J65

Suggested Citation

Larrimore, Jeff and Mortenson, Jacob and Splinter, David, Earnings Shocks and Stabilization During COVID-19 (June 29, 2021). Available at SSRN: https://ssrn.com/abstract=3876745 or http://dx.doi.org/10.2139/ssrn.3876745

Jeff Larrimore (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Jacob Mortenson

Joint Committee on Taxation, US Congress ( email )

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HOME PAGE: http://www.jacobmortenson.com

David Splinter

Joint Committee on Taxation ( email )

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HOME PAGE: http://wwww.davidsplinter.com

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