Did Pandemic Unemployment Benefits Reduce Employment? Evidence from Early State-Level Expirations in June 2021

38 Pages Posted: 20 Dec 2021 Last revised: 24 Apr 2022

See all articles by Harry J. Holzer

Harry J. Holzer

Georgetown University - Public Policy Institute (GPPI); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

R. Glenn Hubbard

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Michael R. Strain

American Enterprise Institute; IZA

Multiple version iconThere are 2 versions of this paper

Date Written: December 2021

Abstract

The generosity of Unemployment Insurance (UI) benefits was expanded during the pandemic (FPUC), along with the groups of workers eligible for benefits (PUA). These two programs were set to expire in September 2021, but 18 states opted out of both in June 2021. Using Current Population Survey data, we present difference-in-difference and event study estimates that the flow of unemployed workers into employment increased by around two-thirds following early termination. We construct a counterfactual scenario that implies the national unemployment rate in each of July and August would have been around 0.3 percentage point lower than they were, and the employment-population ratio would have been around 0.1-0.2 percentage point higher than it was, had all states ended FPUC and PUA in June. Expanded eligibility and generosity of UI may have both slowed transitions from unemployment to employment. We also present some suggestive evidence that households with relatively high confidence in their ability to meet expenses may have been less sensitive to the termination of expanded benefits. Finally, we present evidence that early termination reduced the share of households that had no difficulty meeting expenses by five percent. The welfare implications of the early termination of FPUC and PUA are therefore ambiguous.

Suggested Citation

Holzer, Harry J. and Hubbard, Robert Glenn and Strain, Michael, Did Pandemic Unemployment Benefits Reduce Employment? Evidence from Early State-Level Expirations in June 2021 (December 2021). NBER Working Paper No. w29575, Available at SSRN: https://ssrn.com/abstract=3989583

Harry J. Holzer (Contact Author)

Georgetown University - Public Policy Institute (GPPI) ( email )

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National Bureau of Economic Research (NBER)

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Robert Glenn Hubbard

Columbia University - Columbia Business School, Finance ( email )

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HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)

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Michael Strain

American Enterprise Institute ( email )

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Washington, DC 20036
United States

HOME PAGE: http://sites.google.com/site/mrstrain/

IZA ( email )

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