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We need to be sober and rigorous when evaluating the positives and negatives of emergency UI, and not be wooed by simple, emotional stories.
There's no evidence in the data that emergency UI has been a net drag on the labor market so far. /1 https://twitter.com/brad_polumbo/status/1285652687015628808
There's no evidence in the data that emergency UI has been a net drag on the labor market so far. /1 https://twitter.com/brad_polumbo/status/1285652687015628808
The generosity of UI showed no relationship with the likelihood of finding or leaving a job in May or June. There were workers with high wage replacement rates who left UI for work. There were ones who stayed on UI. /2 https://twitter.com/ernietedeschi/status/1283832188434362368
Of the workers who got rehired out of UI in June, 70% were likely getting UI benefits greater than their prior wage. /3 https://twitter.com/ernietedeschi/status/1285567925596889090
Meanwhile, there are still 5 unemployed workers for each job opening, and even after 2 months of surprisingly-strong jobs growth (in which emergency UI was in place) the unemployment rate is still above its Great Recession *peak* /4. https://twitter.com/ernietedeschi/status/1280519635679555584
And there are still 2 *permanent* layoffs for each job opening. /5 https://twitter.com/ernietedeschi/status/1280615217848868866
If emergency UI were suppressing labor supply overall, we'd expect a firming in wage growth. Wage data is squirrelly right now and there are certainly individual cases of wage growth, but overall it's flat-to-soggy /6 https://twitter.com/ernietedeschi/status/1280519104978395137
Meanwhile we know that emergency UI payments have had a substantial macro effect so far... /7
https://institute.jpmorganchase.com/institute/research/labor-markets/unemployment-insurance-covid19-pandemic
https://institute.jpmorganchase.com/institute/research/labor-markets/unemployment-insurance-covid19-pandemic
...and that eliminating them would be devastating to individual families, as well as to regional economies in aggregate. /8
Nothing prior in this thread relies on macroeconomic simulations, but here's what the Federal Reserve's macro model, coupled with CBO's assumptions about spending multipliers, implies about the economic effects of letting emergency UI expire. GDP is 2% lower. /9
There is a risk that emergency UI would have a negative, binding effect on the labor market in the medium-term as the economy gets close to full employment and the pandemic becomes a distant memory. /10
But I think that risk is low in the short-term, especially when weighed against the macro risk of withdrawing well-targeted income support too early, when the economic outlook is becoming more not less uncertain. /FIN
