Absence of conflict of interest.
Citation
Coombs, K., Dube, A., Jahnke, C., Kluender, R., Naidu, S., & Stepner, M. (2022). Early Withdrawal of Pandemic Unemployment Insurance: Effects on Employment and Earnings. AEA Papers and Proceedings, 112, 85-90. https://www.aeaweb.org/articles?id=10.1257/pandp.20221009
Highlights
- The study's objective was to examine the impact of the early withdrawal of COVID-19 pandemic unemployment insurance (UI) benefits on unemployment insurance receipt, unemployment insurance benefits, employment status, and earnings per week.
- The authors used a difference-in-difference design to compare outcomes for individuals in states that ended pandemic UI benefits early and in those that retained them. The authors relied on bank transaction data for the period from January 1 through September 17, 2021, obtained from Earnin, a financial services company that provides advance access to wages before payday.
- The study found that the early withdrawal of pandemic UI benefits lowered rates of UI benefit receipt and decreased average UI benefit amounts while also increasing employment and average earnings.
- The quality of causal evidence presented in this report is moderate because it was based on a well-implemented non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the early withdrawal of pandemic UI benefits, but other factors might also have contributed.
Intervention Examined
March 2020 Coronavirus Aid, Relief, and Economic Security Act
Features of the Intervention
The March 2020 Coronavirus Aid, Relief, and Economic Security Act extended UI benefit duration beyond the usual 26 weeks in most states, expanded UI benefit eligibility to previously uncovered workers, and supplemented UI payments with an additional $600 per week. These supplemental UI payments, referred to as Federal Pandemic Unemployment Compensation (FPUC), expired in July 2020 but were later restored in January 2021 at $300 per week and were scheduled to continue through September 2021. In total, 26 states opted to end the FPUC supplemental payments early, with 22 states ending payments in June 2021, 3 states ending payments in July 2021, and 1 state ending payments in August 2021.
Features of the Study
The authors employed a difference-in-difference design to compare outcomes for individuals in states that terminated pandemic UI benefits early and in those that retained them.
The authors utilized data from Earnin, a financial services company offering advance access to paid wages before payday. This data enabled tracking of inflows and outflows from sample members' Earnin-linked bank accounts between January 1, 2021, and September 17, 2021.
The analysis sample consisted of 16,253 Earnin-linked bank account holders with a minimum of five outflows per month, who were not employed in regular jobs, and who were receiving UI benefits at the end of April 2021, just prior to the announcement that some states would be withdrawing pandemic UI benefits early.
The authors utilized data from Earnin, a company offering advance access to paid wages before payday. This data enabled tracking of inflows and outflows from sample members' Earnin-linked bank accounts between January 1, 2021, and September 17, 2021. The authors conducted a difference-in-difference analysis to compare outcomes for individuals in early withdrawal states (those that ended pandemic UI benefits early) and retain states (those that retained pandemic UI benefits through September 2021), before and after the announcement that some states would be withdrawing pandemic UI benefits early.
Findings
Public Benefits Receipt
- The study found that individuals in early withdrawal states experienced a 36.3 percentage point decrease in the rate of UI receipt and a $281.50 decrease in UI benefits, compared to individuals in states that retained pandemic UI benefits through September 2021.
Employment
- The study found that individuals in early withdrawal states experienced a 6.8 percentage point increase in reemployment, compared to individuals in states that retained pandemic UI benefits through September 2021.
Earnings and Wages
- The study found that individuals in early withdrawal states experienced a $38.30 increase in weekly earnings, compared to individuals in states that retained pandemic UI benefits through September 2021.
Considerations for Interpreting the Findings
The authors note that that increases in employment and earnings associated with the early withdrawal of pandemic UI benefits were not large enough to offset lost income. That is, even though early withdrawal was associated with a favorable impact on individuals’ earnings, the authors note that early withdrawal was associated to a $243 decrease in total weekly income (UI payments plus earnings) for the average unemployed worker.
The authors exclude six states that withdrew benefits early from the analysis: four states that withdrew pandemic UI benefits after June 2021, one state that ultimately reinstated withdrawn benefits due to a court order, and one state that rarely distributed UI benefits via direct deposit.
Causal Evidence Rating
The quality of causal evidence presented in this report is moderate because it was based on a well-implemented non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the early withdrawal of pandemic UI benefits, but other factors might also have contributed.