Earnings Shocks and Stabilization During COVID-19

Jeff Larrimore, Jacob Mortenson and David Splinter

No 2021-052, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper documents the magnitude and distribution of U.S. earnings changes during the COVID-19 pandemic and how fiscal relief offset lost earnings. We build panels from administrative tax data to measure annual earnings changes. The frequency of earnings declines during the pandemic were similar to the Great Recession, but the distribution was very different. In 2020, workers starting in the bottom half of the distribution were more likely to experience large annual earnings declines and a similar share of male and female workers had large earnings declines. While most workers experiencing large annual earnings declines do not receive unemployment insurance, over half of beneficiaries were made whole in 2020, as unemployment insurance replaced a median of 103 percent of their annual earnings declines. After incorporating unemployment insurance, the likelihood of large earnings declines among low-earning workers was not only smaller than during the Great Recession, but also smaller than in 2019.

Keywords: COVID-19; Wage earnings; Stimulus checks; Unemployment insurance; Countercyclical policy (search for similar items in EconPapers)
JEL-codes: D31 E24 H53 J30 J65 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2021-08-02
New Economics Papers: this item is included in nep-ias, nep-isf, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.federalreserve.gov/econres/feds/files/2021052pap.pdf (application/pdf)

Related works:
Journal Article: Earnings shocks and stabilization during COVID-19 (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-52

DOI: 10.17016/FEDS.2021.052

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