Research Briefing | Jun 30, 2021

US | Enhanced benefits aren’t the labor market’s top problem

Ipad Frame (54)

Enhanced US unemployment benefits are discouraging only a small share of unemployed workers from finding jobs. The disincentive to work is greatest among lower-wage workers in states where the combination of emergency and regular unemployment benefits are the highest relative to prevailing wages.

What you will learn:

  • An increase in the number of people receiving benefits doesn’t dramatically weaken job-search activity, and states offering high replacement wages haven’t experienced significantly slower job growth.
  • In the current environment, low-wage workers in states that aren’t ending the federal emergency benefits early might be tempted to temporarily remain unemployed since they can earn 10%-20% more from unemployment benefits.
  • Health conditions are the most important factor for labor market healing. Cross-correlation analysis indicates states loosen restrictions three to four weeks after a consistent downturn in new cases, which then allows labor markets to heal more quickly.
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