Impacts of the COVID-19 Pandemic and the CARES Act on Earnings and Inequality

Guido Matias Cortes and Eliza Forsythe

No 13643, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using data from the Current Population Survey (CPS), we show that the COVID-19 pandemic led to a loss of aggregate real labor earnings of more than $250 billion between March and July 2020. By exploiting the panel structure of the CPS, we show that the decline in aggregate earnings was entirely driven by declines in employment; individuals who remained employed did not experience any atypical earnings changes. We find that job losses were substantially larger among workers in low-paying jobs. This led to a dramatic increase in inequality in labor earnings during the pandemic. Simulating standard unemployment benefits and UI provisions in the CARES Act, we estimate that UI payments exceeded total pandemic earnings losses between March and July 2020 by $9 billion. Workers who were previously in the bottom third of the earnings distribution received 49% of the pandemic associated UI and CARES benefits, reversing the increases in labor earnings inequality. These lower income individuals are likely to have a high fiscal multiplier, suggesting these extra payments may have helped stimulate aggregate demand.

Keywords: earnings inequality; unemployment insurance; COVID-19 (search for similar items in EconPapers)
JEL-codes: E24 H53 H84 J31 J65 J68 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020-08
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Published - published as 'Distributional Impacts of the COVID-19 Pandemic and the CARES Act' in: Journal of Economic Inequality, 2023, 21 (2), 325-349.

Downloads: (external link)
https://docs.iza.org/dp13643.pdf (application/pdf)

Related works:
Working Paper: Impacts of the COVID-19 pandemic and the CARES act on earnings and inequality (2021)
Working Paper: Impacts of the Covid-19 Pandemic and the CARES Act on Earnings and Inequality (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp13643

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().