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Impacts of the COVID-19 pandemic and the CARES act on earnings and inequality

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  • Cortes, Guido Matias
  • Forsythe, Eliza

Abstract

Using data from the Current Population Surveys, we investigate the aggregate and distributional consequences of the Covid-19 pandemic and the associated public policy response on labor earnings and unemployment benefits in the United States up until February 2021. We find that year-on-year changes in labor earnings for employed individuals were not atypical during the pandemic months, regardless of their initial position in the earnings distribution. The incidence of job loss, however, was, and continues to be, substantially higher among low earners, leading to a dramatic increase in labor income inequality among the set of individuals who were employed prior to the onset of the pandemic. By providing very high replacement rates for individuals displaced from low-paying jobs, the initial public policy response was successful in reversing the regressive nature of the pandemic's impacts. We estimate, however, that recipiency rates for displaced low earners were relatively low. Moreover, from September onwards, when policy changes led to a decline in benefit levels, earnings changes became much more regressive, even after factoring in benefits.

Suggested Citation

  • Cortes, Guido Matias & Forsythe, Eliza, 2021. "Impacts of the COVID-19 pandemic and the CARES act on earnings and inequality," CLEF Working Paper Series 41, Canadian Labour Economics Forum (CLEF), University of Waterloo.
  • Handle: RePEc:zbw:clefwp:41
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    Cited by:

    1. Guido Matias Cortes & Eliza Forsythe, 2023. "Distributional impacts of the Covid-19 pandemic and the CARES Act," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 325-349, June.
    2. Dias, Felipe A & Chance, Joseph, 2021. "COVID-19, Public Charge Rules, and Immigrant Employment in the United States," Institute for Research on Labor and Employment, Working Paper Series qt37f8w4sf, Institute of Industrial Relations, UC Berkeley.
    3. Ainaa, Carmen & Brunetti, Irene & Mussida, Chiara & Scicchitano, Sergio, 2021. "Who lost the most? Distributive effects of COVID-19 pandemic," GLO Discussion Paper Series 829, Global Labor Organization (GLO).
    4. Seonho Shin, 2022. "Labor market impact of COVID‐19 on migrants in South Korea: Evidence from local outbreaks," Asian Economic Journal, East Asian Economic Association, vol. 36(3), pages 229-260, September.
    5. Bossavie,Laurent Loic Yves & Garrote Sanchez,Daniel & Makovec,Mattia & Ozden,Caglar, 2021. "Occupational Hazards : Migrants and the Economic and Health Risks of COVID-19 in Western Europe," Policy Research Working Paper Series 9873, The World Bank.
    6. Nayga, Jr., Rodolfo M. & Valizadeh, Pourya & Melo, Grace, 2022. "SNAP and well-being of low-income households with children before and during the pandemic," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322184, Agricultural and Applied Economics Association.
    7. Kosteas, Vasilios D. & Renna, Francesco & Scicchitano, Sergio, 2022. "Covid-19 and Working from Home: toward a "new normal"?," GLO Discussion Paper Series 1013, Global Labor Organization (GLO).
    8. Christian Bayer & Benjamin Born & Ralph Luetticke & Gernot J Müller, 2023. "The Coronavirus Stimulus Package: How Large is the Transfer Multiplier," The Economic Journal, Royal Economic Society, vol. 133(652), pages 1318-1347.
    9. Francesco Fasani & Jacopo Mazza, 2023. "Being on the Frontline? Immigrant Workers in Europe and the COVID-19 Pandemic," ILR Review, Cornell University, ILR School, vol. 76(5), pages 890-918, October.
    10. Shradha Kundra & Naman Sreen & Rohit Dwivedi, 2023. "Impact of Work from Home and Family Support on Indian Women’s Work Productivity During COVID-19," Vikalpa: The Journal for Decision Makers, , vol. 48(1), pages 39-53, March.
    11. Rodríguez-Planas, Núria, 2022. "Hitting where it hurts most: COVID-19 and low-income urban college students," Economics of Education Review, Elsevier, vol. 87(C).
    12. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2022. "Earnings shocks and stabilization during COVID-19," Journal of Public Economics, Elsevier, vol. 206(C).
    13. Joe Piacentini & Harley Frazis & Peter B. Meyer & Michael Schultz & Leo Sveikauskas, 2022. "The Impact of COVID-19 on Labor Markets and Inequality," Economic Working Papers 551, Bureau of Labor Statistics.
    14. Richard B. Freeman, 2022. "Planning for the “Expected Unexpected”: Work and Retirement in the U.S. After the COVID-19 Pandemic Shock," NBER Working Papers 29653, National Bureau of Economic Research, Inc.
    15. Schettino, Francesco & Scicchitano, Sergio & Suppa, Domenico, 2024. "COVID 19 and Wage Polarization: A task based approach," GLO Discussion Paper Series 1398, Global Labor Organization (GLO).
    16. Malak Kandoussi & François Langot, 2021. "On the heterogeneous impacts of the COVID-19 lockdown on US unemployment," TEPP Working Paper 2021-01, TEPP.
    17. Zimpelmann, Christian & Gaudecker, Hans-Martin von & Holler, Radost & Janys, Lena & Siflinger, Bettina, 2021. "Hours and income dynamics during the Covid-19 pandemic: The case of the Netherlands," Labour Economics, Elsevier, vol. 73(C).
    18. Giovanni Gallo & Michele Raitano, 2020. "SOS incomes: Simulated effects of COVID-19 and emergency benefits on individual and household income distribution in Italy," Working Papers 566, ECINEQ, Society for the Study of Economic Inequality.
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    More about this item

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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