Impacts of COVID-19 and the Unemployment Insurance System on Workers, Firms, and Inequality

Millions of workers have lost their jobs as a result of the COVID-19 pandemic. In response, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 extended the duration of UI benefits by 13 weeks and increased payments by $600 per week through July 31, 2020. The CARES Act also temporarily (through December 2020) loosened eligibility criteria and included part-time workers, freelancers, independent contractors, and the self-employed who lose jobs as a result of the pandemic; it also waived work history requirements. Although the combination of UI, the increased generosity of benefits and expanded eligibility provided emergency assistance for many workers, access to benefits remains highly unequal. Workers who are young, less-educated, black, or female represent the largest share of pandemic-related claims. How is the UI system aiding those groups and how does UI receipt affect subsequent labor market outcomes (e.g., employment, earnings, and the probability of recall by their former employer)? Did the UI expansion sustain job attachment and, if so, for whom? Is there evidence that moral hazard related to the $600 additional weekly benefit affects reemployment? Economist Till von Wachter and a research team at the California Policy Lab will use administrative data for California to examine the impact of UI expansions on labor market dynamics, as well as to examine how this recession differs from earlier ones (e.g., who got laid off, who expects to be called back, the quality of job matches). Von Wachter has twenty years of data from the California Employment Development Department (EDD), which administers the UI system. The data include counts of UI claims, UI benefit receipt, demographic information (i.e., gender, race, age, highest level of education, and geography), industry of previous employer, and whether workers at the time of filing expect to be recalled to their prior job. Von Wachter also has quarterly earnings for all workers reported by employers and firm identifiers. For firms, the PI has monthly data from the Quarterly Census of Employment and Wages, including establishment size, wage bill, industry, location, credit scores, and demographic composition of the workforce, which can be merged with other firm-level data from Dunn & Bradstreet. Data from the Current Population Survey will help benchmark overall unemployment levels in California.