Working Paper: NBER ID: w27727
Authors: Corina Boar; Simon Mongey
Abstract: The CARES Act resulted in many unemployed workers receiving benefits that exceeded wages at their previous job. Given this, would an unemployed worker reject an offer to return to their former job at the same wage? Qualitatively, we provide a very simple dynamic model that incorporates four reasons the answer could be ‘no’: (i) the temporary nature of the CARES Act, (ii) uncertainty that their return-to-work offer might expire, (iii) search frictions, and (iv) wage losses out of unemployment in a recession. Quantitatively, when evaluated under empirically relevant parameters, we find it unlikely a worker would reject an offer to return to work at the same wage. We show special cases where this is not true and relate these to anecdotal evidence.
Keywords: CARES Act; labor supply; unemployment benefits
JEL Codes: E24; J64; J68
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CARES Act benefits (H84) | workers considering rejecting return-to-work offers (J63) |
| expiration probability of CARES Act benefits (H55) | reservation replacement rate (J26) |
| likelihood of losing return-to-work offer (J63) | reservation replacement rate (J26) |
| time taken to find a new job (J63) | reservation replacement rate (J26) |
| reservation replacement rate > actual replacement rate under CARES Act (H55) | workers prefer to remain unemployed (J68) |
| expiration probability, likelihood of job offer loss, time to find a new job (J63) | value of unemployment (J64) |