Working Paper: NBER ID: w30435
Authors: Gopi Shah Goda; Evan J. Soltas
Abstract: We show that Covid-19 illnesses persistently reduce labor supply. Using an event study, we estimate that workers with week-long Covid-19 work absences are 7 percentage points less likely to be in the labor force one year later compared to otherwise-similar workers who do not miss a week of work for health reasons. Our estimates suggest Covid-19 illnesses have reduced the U.S. labor force by approximately 500,000 people (0.2 percent of adults) and imply an average forgone earnings per Covid-19 absence of at least $9,000, about 90 percent of which reflects lost labor supply beyond the initial absence week.
Keywords: COVID-19; labor supply; health-related absences; event study
JEL Codes: I12; J17; J21; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher health-related absence rates (I12) | elevated COVID-19 case rates (R23) |
| COVID-19 illnesses (I12) | persistent reduction in labor supply (J22) |
| weeklong absence due to COVID-19 (J22) | less likely to be in the labor force one year later (J22) |
| COVID-19 illnesses (I12) | 500,000 individuals exited the labor force (J63) |
| COVID-19 illnesses (I12) | 0.2% decrease in overall labor force (J21) |
| COVID-19 absence (J22) | average economic cost of $9,000 (Q51) |