Studies Show $600 Weekly Enhanced Unemployment Benefit
Has Not Slowed Labor Market Recovery
President Trump, administration officials and Congressional Republicans claim that the $600 weekly
Federal Pandemic Unemployment Compensation (FPUC) benefit, which expired on July 31, slowed
job growth because it gave unemployed workers a disincentive to go back to work. Five recent
studies find no evidence to support this claim.
The assertion rises from a study by researchers at the University of Chicago, who found that someunemployed workers, particularly those with low incomes, earned more in combined unemployment
insurance (UI) benefits than in their previous jobs. 1 This is a result of dysfunctional state
unemployment systems, which forced Congress to set a uniform benefit nationwide to help replace
lost wages. However, fewer workers are helped “too much” when factoring in the value of employerprovided health insurance and other benefits, according to analysis by Michele Evermore of theNational Employment Law Project and Marokey Sawo of the Groundwork Collaborative.2A majority of unemployed workers who returned to work in June received more in combined UI
benefits than their previous wages.3 This partly is because workers are unlikely to turn down a job for
temporary unemployment benefits and partly because they cannot continue to receive UI benefits ifthey refuse a “suitable” job offer. While some observers have offered anecdotal evidence of workers
choosing to receive UI benefits instead of returning to work, research strongly suggests that in theaggregate this is not the case. With four unemployed workers for every job opening, the number one
reason preventing the unemployed from returning to work is that there aren’t enough available jobs. 4
1. Dana Scott and Joseph Altonji et al., Tobin Center for Economic Policy, Yale University“We find no evidence that more generous benefits disincentivized work either at the onset of theexpansion or as firms looked to return to business over time.”
The study that has received the most attention is by Yale economists, who found no evidence thathigher replacement rates reduced employment.5 Their research examined weekly data fromHomebase, a scheduling and timesheet system used by restaurants, bars, retail stores and otherservice-sector businesses hardest hit by the pandemic. The study found that workers who received
higher amounts of UI did not experience larger declines in employment when the benefits went into
effect and they returned to their previous jobs at similar rates as others.6
2. Arindrajit Dube, University of Massachusetts, Amherst“Overall, these findings do not provide evidence supporting the claim that the FPUC has held backthe labor market recovery.”Economist Arindrajit Dube used the Census Pulse Survey of 70,000-130,000 households per week todetermine whether enhanced UI benefits had a negative impact on employment by disincentivizing
labor supply or reducing job creation.7 His research, which focused on unemployed workers age 18 orover who do not have a college degree, found no negative effect on employment. Dube’s findings are
similar to those of the Yale researchers but rely on different data and empirical design.

Studies Show $600 Weekly Enhanced Unemployment Benefit Has Not Slowed Labor Market Recovery

3. Ioana Marinescu, Daphné Skandalis and Daniel Zhao
“Overall, our evidence suggests that employers did not experience greater difficulty finding
applicants for their vacancies after the CARES Act, despite the large increase in unemploymentbenefits.”
Economists Ioana Marinescu of the University of Pennsylvania, Daphné Skandalis of the Federal
Reserve Bank of New York and Daniel Zhao of Glassdoor, Inc. examined the issue from theperspective of employers, using data on job listings and applications from the online platform
Glassdoor.8 They found that employers did not have greater difficulty finding applicants forvacancies after enhanced unemployment benefits were implemented. Employers posted fewer job
listings, but received more applications per vacancy, even in lower wage occupations.
4. Alexander Bartik et al.
“We find no evidence that high UI replacement rates drove job losses or slowed rehiring.”
University of Illinois economist Alexander Bartik and colleagues at the University of Chicago andthe University of California, Berkeley conducted an expansive study using traditional and nontraditional employment data, finding that states with more generous UI benefits had milder declines
and faster recoveries in employment.9 The authors also found no evidence that high replacement rates
drove job losses or slowed rehiring.
5. Ernie Tedeschi, Economist and former Senior Adviser, U.S. Department of the Treasury“The bottom line was that I found no evidence of any effect on labor market flows from moregenerous UI in May and June, controlling for other demographic factors.”
Economist Ernie Tedeschi used the Current Population Survey to examine the effect of wage
replacement rates—the ratio of unemployment benefits to previous wages—on the likelihood that aworker left a job or accepted a new one.10 He found no evidence that generous unemployment
benefits had an effect on employment. His further analysis revealed that around 70 percent of UI
recipients who returned to work in June had earned more in UI than their prior wage.11
Tedeschi and others have noted that enhanced benefits could creative disincentives for workers andhave a negative effect on the labor market if they remain in place while the economy eventually
moves toward full employment. This would suggest that enhanced benefits gradually should belowered as the unemployment rate drops, balancing efforts to sustain unemployed workers during aperiod of high unemployment with the need to achieve economic recovery.
Additional reading“The Myth of Unemployment Benefits Depressing Work,” The Washington Post
“Unemployment Recipients Share Why They Returned to Work During the Pandemic Despite $600
Weekly Boost,” CNBC
“Is $600 a Week in Extra Unemployment Aid Deterring People From Seeking Work?” The WallStreet Journal

Page 2Studies Show $600 Weekly Enhanced Unemployment Benefit Has Not Slowed Labor Market Recovery

Peter Ganong, Pascal Noel and Joseph S. Vavra, “US Unemployment Insurance Replacement Rates During thePandemic,” Becker Friedan Institute, University of Chicago, May 14, 2020, https://bfi.uchicago.edu/working-paper/202062/.
1

Michele Evermore and Marokey Sawo, “Unemployed Workers and Benefit ‘Replacement Rate’: An ExpandedAnalysis,” National Employment Law Project and Groundwork Collaborative, https://groundworkcollaborative.org/wpcontent/uploads/2020/08/GWC2046-Replacement-Rate-Memo.pdf.
2

3

Ernie Tedeschi, https://twitter.com/ernietedeschi/status/1285567925596889090.

U.S. Bureau of Labor Statistics, “Number of unemployed persons per job opening, seasonally adjusted,”
https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm.
4Dana Scott and Joseph Altonji et al, “Employment Effects of Unemployment Insurance Generosity During thePandemic,” Yale University, July 14, 2020, https://tobin.yale.edu/sites/default/files/files/C-19%20Articles/CARESUI_identification_vF(1).pdf.
56Dana Scott and Joseph Altonji et al.

Arindrajit Dube, “The Impact of the Federal Pandemic Unemployment Compensation on Employment: Evidence fromthe Household Pulse Survey,” July 31, 2020,
https://www.dropbox.com/s/q0kcoix35jxt1u4/UI_Employment_HPS.pdf?dl=0.
7

Ioana Elena Marinescu, Daphné Skandalis and Daniel Zhao, “Job search, job posting and unemployment insurance
during the COVID-19 crisis,” SSRN, July 20, 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3664265.
8Alexander W. Bartik et al., “Measuring the labor market at the onset of the COVID-19 crisis,” NBER Working Paper
No. 27613, July 2020, https://www.nber.org/papers/w27613.pdf.
910Ernie Tedeschi, https://twitter.com/ernietedeschi/status/1283829018735910917.

11

Ernie Tedeschi, https://twitter.com/ernietedeschi/status/1285567925596889090.

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