Death Without Benefits: Unemployment Insurance, Re-Employment, and the Spread of Covid

72 Pages Posted: 27 Jun 2024

See all articles by Sungbin Park

Sungbin Park

George Mason University

Kyung Min Lee

World Bank; George Mason University - Schar School of Policy and Government

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Date Written: April 10, 2024

Abstract

During a pandemic, unemployment insurance (UI) may have externalities for health. Studying variation across states in UI benefit cuts during summer 2021, using longitudinally linked Current Population Survey data, and controlling for individual and state characteristics, we find that unemployment-employment transitions rise 10 percentage points (42 percent of the untreated mean) in treated states that cut UI early, relative to states maintaining higher benefits. Estimates of hazards and censored regressions imply a benefit elasticity of unemployment duration of 0.5-0.7. Using an instrumental variables strategy, we find sharp covid rises in states with higher re-employment rates because of the UI cuts: case, hospitalization, and death rates are all estimated to more than double. Consistent with a causal interpretation, the differences between treated and other states in re-employment and covid outcomes are negligible prior to treatment, diverge simultaneously with the policy change, and reconverge quickly after the end of the policy difference. Results are robust to controlling for other relevant factors and policies. We estimate that additional wages of $1.1bln received by re-employed workers offset only one-eighth of the UI losses, and, even from a government budget perspective, UI savings are more than offset by increased hospitalization costs of $14.8bln. Increases in illness-related losses in work time can be valued at $1.5bln. Beyond the monetary and morbidity costs of the UI cuts, we estimate additional deaths at 27,000. The results suggest an important role for UI during infectious stages of pandemics that should be considered for future policy design.

Keywords: unemployment, social safety net, covid, community transmission, unemployment insurance

JEL Classification: J65, I18

Suggested Citation

Park, Sungbin and Lee, Kyung Min and Earle, John S., Death Without Benefits: Unemployment Insurance, Re-Employment, and the Spread of Covid (April 10, 2024). The University of Chicago Stone Center Working Paper Series Paper No. 24-02, Available at SSRN: https://ssrn.com/abstract=4855532 or http://dx.doi.org/10.2139/ssrn.4855532

Sungbin Park

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

Kyung Min Lee

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

George Mason University - Schar School of Policy and Government ( email )

Founders Hall, Fifth Floor
3351 Fairfax Drive, MS 3B1
Arlington, VA 22201
United States

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
49
Abstract Views
437
PlumX Metrics