Working Paper: NBER ID: w29575
Authors: Harry J. Holzer; R. Glenn Hubbard; Michael R. Strain
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.
Keywords: Pandemic Unemployment Benefits; Employment; Labor Market; Unemployment Insurance
JEL Codes: J08; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| early termination of pandemic unemployment benefits (J65) | flow of unemployed workers into employment (J68) |
| early termination of pandemic unemployment benefits (J65) | national unemployment rate (J64) |
| early termination of pandemic unemployment benefits (J65) | employment-population ratio (J68) |
| higher confidence in meeting expenses (G51) | sensitivity to termination of benefits (J65) |
| early termination of pandemic unemployment benefits (J65) | households reporting no difficulty in meeting expenses (D12) |