Boosted unemployment benefits didn't incentivize Americans to stay jobless, Fed study shows — diminishing one of Republicans' key arguments against extra payments

• In a new study, economists at the Federal Reserve Bank of San Francisco found that expanded unemployment benefits had little-to-no disincentive effect on unemployed Americans' efforts to be rehired.
• The researchers determined that, while the temporary expansion led some workers to fully recoup their lost wages, most continued to seek and accept job openings throughout the pandemic.
• The findings suggest the benefits supplement was meant "to provide the income needed for households to make essential purchases and payments" while seeking new jobs, economists Nicolas Petrosky-Nadeau and Robert Valletta wrote.
• The conclusions rebut claims from the White House and Republican lawmakers that expanded benefits incentivized jobless Americans to stay out of the workforce.

A new study from the Federal Reserve Bank of San Francisco found that expanded unemployment benefits had little to no adverse effect on jobless Americans' job search efforts.

The $600-per-week expansion to unemployment benefits was a key tenet of March's CARES Act. The boosted insurance program offered millions of jobless Americans a temporary source of income as the coronavirus pandemic roiled the economy.

Yet the aid faced strong opposition before it was enacted and as some seek to reinstate the $600 buffer. Republicans and the Trump administration knocked the measure, saying the bolstered payments demotivated unemployed Americans from seeking work or accepting jobs.

The San Francisco Fed's research finds such claims are largely unfounded. Available aid didn't outweigh the value of stable income in workers' decisions to accept jobs, economists Nicolas Petrosky-Nadeau and Robert Valletta wrote in the Monday report. The rarity of job openings throughout the coronavirus pandemic also kept unemployed Americans from seeking out the few available roles, they added.

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Citing past research on the expanded benefits, the economists concluded that 68% of recipients took in benefits that exceeded the wages they had been making before losing their jobs.

Another paper by Petrosky-Nadeau published this year identified the "reservation benefit," or the dollar amount of unemployment benefits needed for a jobless American to be indifferent about accepting a job offer. For said American to accept a job offer, the dollar amount of current benefit would need to surpass the reservation benefit.

The researchers calculated the reservation benefit for several jobs ranging from janitors to medical assistants to determine which benefits recipients would refuse to return to their past jobs if given the chance. For example, a worker who previously made $800 per week would receive benefits augmented by the CARES Act of $1,000 per week. The team's reservation benefit calculation suggests the worker would need to receive another $250 in benefits before growing indifferent toward accepting a job.

When the payment expansion was $600 per week, foodservice workers required little-to-no increase in benefits to consider rejecting a job offer, according to the study. Teachers' reservation benefit sat above $2,000, suggesting they required another $1,000 in benefits before ending their job searches. When the expansion fell to $400 per week due to President Donald Trump's August 8 executive order, the number of unmet reservation benefits increased.

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The team also analyzed how increased benefits affected unemployed Americans' actual decisions in rejoining the labor market. By comparing job-finding outcomes between Americans in different states before and after the $600 per week expansion was introduced, the economists determined there was little-to-no evidence of a disincentive effect of unemployment benefits on finding and accepting jobs.

The benefits' size also didn't keep Americans from looking to be rehired. States in the 90th percentile of benefit size saw more residents find and accept jobs on average. States in the 10th percentile saw similarly elevated job-seeking activity but at a slower pace, barring a reversal in July.

"These findings suggest that the primary impact of the UI supplement was to provide the income needed for households to make essential purchases and payments, thereby helping to sustain overall economic activity and employment," the economists said.

They continued: "Stated more starkly, with infrequent job offers and supplemental UI payments being only temporary, job seekers do not have the luxury to be choosy and delay accepting a job in favor of continuing to receive those benefits."

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