Earnings Business Cycles: The Covid Recession, Recovery, and Policy Response

27 Pages Posted: 23 Dec 2022

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

Date Written: December 5, 2022

Abstract

Using a panel of tax data, we follow the earnings of individuals over business cycles. Compared to prior recessions, the Covid policy response and recovery were far more progressive. Among workers starting in the bottom quintile, median real earnings including fiscal relief increased 66 percent in 2020 and earnings increases offset relief decreases in the 2021 recovery. After the prior two recessions, this measure had decreased by 24 percent. Among those starting in the top quintile, median and average real earnings were approximately unchanged. This difference from prior recessions is largely attributable to larger Covid-era stimulus payments and unemployment insurance.

Keywords: Covid-19, wages, earnings, stimulus checks, unemployment insurance, countercyclical policy, government transfers

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

Suggested Citation

Larrimore, Jeff and Mortenson, Jacob and Splinter, David, Earnings Business Cycles: The Covid Recession, Recovery, and Policy Response (December 5, 2022). Available at SSRN: https://ssrn.com/abstract=4301437 or http://dx.doi.org/10.2139/ssrn.4301437

Jeff Larrimore (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jacob Mortenson

Joint Committee on Taxation, US Congress ( email )

502 Ford House Office Building
Washington, DC 20515
United States

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

David Splinter

Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States
202-225-3621 (Phone)

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

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