Enhanced Unemployment Insurance Benefits in the United States during COVID-19: Equity and Efficiency

2024-15 | May 6, 2024

We assess the effects of the historically unprecedented expansion of U.S. unemployment insurance (UI) payments during the COVID-19 pandemic. The adverse economic impacts of the pandemic, notably the pattern of job losses and earnings reductions, were disproportionately born by lower-income individuals. Focusing on household income as a broad measure of well-being, we document that UI payments almost completely offset the increase in household income inequality that otherwise would have occurred in 2020 and 2021. We also examine the impacts of the $600 increase in weekly UI benefit payments, available during part of 2020, on job search outcomes. We find that despite the very high replacement rate of lost earnings for low-wage individuals, the search disincentive effects of the enhanced UI payments were limited overall and smaller for individuals from lower-income households. These results suggest that the pandemic UI expansions improved equity but had limited consequences for economic efficiency.

About the Authors
Robert G. Valletta is senior vice president and associate director of research in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Robert G. Valletta
Mary Yilma, Massachusetts Institute of Technology