The $600 unemployment bonuses did not lead to people working less, Yale study finds

In this photo taken Thursday, June 4, 2020, a pedestrian wearing a mask walks past reader board advertising a job opening for a remodeling company, in Seattle. The U.S. unemployment rate fell to 13.3% in May, and 2.5 million jobs were added — a surprisingly positive reading in the midst of a recession that has paralysed the economy and depressed the job market in the wake of the viral pandemic. (AP Photo/Elaine Thompson) Associated Press
  • Economists at Yale University found no evidence that the $US600 weekly jobless benefits Congress authorised in March reduced employment.
  • The Chicago Fed also found a similar trend in June 2020.
  • The findings directly challenge a claim frequently made by Republican lawmakers and members of the Trump administration that the extra unemployment payments decreased people’s desire to re-enter the workforce.
  • The expanded benefits from the CARES Act, which provided a $US2.2 trillion stimulus package in March, are set to expire on July 31.
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A report by economists at Yale University did not find any evidence that the $US600 weekly jobless benefits authorised by Congress in March in response to the COVID-19 outbreak reduced employment in the US.

Findings suggest that in the aggregate, the expanded benefits “neither encouraged layoffs during the pandemic’s onset nor deterred people from returning to work once businesses began reopening. “

“Workers facing larger expansions in unemployment insurance benefits have returned to their previous jobs over time at similar rates as others,” the economists said. “We find no evidence that more generous benefits disincentivize work either at the onset of the expansion or as firms looked to return to business over time. In future research, it will be important to assess whether the same results hold when states move to reopen.”

The $US600 per week unemployment benefits that millions of Americans have been receiving under the CARES Act expire at the end of July. This comes as members of the Trump administration have been critical of these benefits to unemployed Americans, claiming they disincentivize people returning to work.

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White House economic adviser Larry Kudlow in June told CNN that the measure was a “disincentive” to work, adding that “we’re paying people not to work.”

On the contrary, the study didn’t find any evidence that recipients of more generous benefits were less likely to return to work. The researchers concluded that workers who received larger increases in their unemployment benefits relative to their wages did not experience greater declines in employment after the CARES Act was enacted.

The researchers used weekly data from Homebase, which is a company that provides time-sheet software and scheduling to small businesses across the U.S.

“The data do not show a relationship between benefit generosity and employment paths after the CARES Act, which could be due to the collapse of labour demand during the COVID-19 crisis,” said Joseph Altonji, the Thomas DeWitt Cuyler Professor of Economics in the Faculty of Arts and Sciences, and a co-author of the report.

The Federal Reserve Bank of Chicago found a similar trend, according to MarketWatch. “Those currently collecting benefits search more than twice as intensely as those who have exhausted their benefits,” said the study published in June 2020. The Chicago Fed study also noted that unemployment benefits generally last for six months while individuals on average pay roughly 35% of their weekly salary from the prior week.

GOP lawmakers on Monday introduced a $US1 trillion stimulus plan that includes a second $US1,200 direct payment for Americans.

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This plan that was initially introduced on the Senate floor by Sen. Chuck Grassley of Iowa additionally includes provisions for another round of stimulus payments, an extended-yet-reduced unemployment benefit and $US60 billion allocated for more small-business loans.

These provisions would first need to be approved by the Democrat-controlled House of Representatives and signed into law before going into effect.

Democratic lawmakers have indicated a willingness to negotiate around the exact number in the extension of unemployment benefits.

“Look, it’s not $US600 or bust,” House Majority Leader Steny Hoyer said in a recent interview. “Pelosi said the other day, which I thought was a great line: ‘We don’t have red lines, we have values.’ We’re going into these negotiations with values.”