Wednesday, Oct. 20, 2021
Did the size of unemployment insurance change throughout the COVID-19 recession?
Unemployment insurance (UI) does not typically fully cover lost wages. However, during recessions benefits may be increased for a short period of time when jobs are not available and disincentives to work are minimal. Expanded UI benefits after the CARES Act even replaced more than some workers pre-pandemic wages; for example, a full-time worker in CA earning $20 per hour pre-pandemic saw their wage replacement rate jump from 50% to 125% to 87.5% to 50% and then settle back at 87.5% before expanded benefits expired in September. Ideally, expanded UI benefits should coincide with the start of an economic contraction to help affected workers but should be removed as the economy recovers to maintain work incentives that facilitate economic growth. Timing is everything, and regional differences in economic recovery mean adjustment of expanded UI benefits should vary geographically as well.
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