The Impact of Federal Pandemic Unemployment Compensation on Job Hunting and Vacancy Creation

https://doi.org/10.1016/j.jpubeco.2021.104471

Explanation

This study examines the effect of providing unemployment benefits during the COVID-19 pandemic.

The Federal Pandemic Unemployment Compensation (FPUC) increased unemployment benefits in the United States by $600 per week. In theory, the FPUC predicts that people should apply for fewer jobs, but the effect on this is considered ambiguous.

Using detailed data from online job platform Glassdoor, we estimated and analyzed the impact of the FPUC on job applications and job creation every week from March to July 2020.

To isolate the impact of FPUC, we had the flexibility to account for different trends in the local labor market that were discriminatively exposed to the COVID-19 crisis.

The results showed that a 10 percent increase in unemployment benefits resulted in a 3.6 percent decrease in the number of applicants, but no decrease in the creation of vacancies. Therefore, the FPUC assumed that the labor market tightness (vacancies/applications) would increase. We then document an abnormal decline in tightness during FPUC. These suggest that the positive effect of FPUC on tightness is likely to be an improvement in welfare, and we find that FPUC reduces competition among applicants during periods when jobs were unusually scarce. the results of the study also help explain the earlier finding that FPUC did not reduce employment. The results also help explain previous findings that FPUC did not reduce employment.