UI Benefits Exceed Lost Earnings for Most Unemployed (Becker Friedman Institute)
Summary
A Becker Friedman Institute research brief dated May 15, 2020 by Peter Ganong, Pascal Noel and Joseph S. Vavra on the $600 weekly unemployment insurance (UI) supplement created by the CARES Act. Using micro data on earnings and each state's UI rules, the authors find that 68% of unemployed workers eligible for UI will receive benefits that exceed lost earnings, that the median replacement rate is 134%, and that one out of five eligible unemployed workers will receive at least twice their lost earnings. The brief gives examples: the median laid-off retail worker can collect 142% of prior wages, and unemployed janitors from businesses that shut down can collect 158%. The authors also examine how alternative UI expansion policies would change the distribution of replacement rates.
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Research Briefs · May 15, 2020 UI Benefits Exceed Lost Earnings for Most Unemployed The $600 supplement to UI under the CARES Act leads to earnings replacement rates above 100% for two-thirds of eligible unemployed. Peter Ganong , Pascal Noel , and Joseph S. Vavra One provision of the CARES Act created an additional $600 weekly unemployment benefit to help workers losing jobs as a result of the COVID-19 pandemic. The authors use micro data on earnings together with the details of each state’s UI system under the CARES Act to compute the entire distribution of current UI benefits and show how replacement rates vary across occupations and states. The authors find that 68% of unemployed workers who are eligible for UI will receive benefits that exceed lost earnings. The median replacement rate is 134%, and one out of five eligible unemployed workers will receive benefits at least twice as large as their lost earnings. We also show that there is sizable variation in the effects of the CARES Act across occupations and across states, with important distributional consequences. For example, the median retail worker who is laid-off can collect 142% of prior wages in UI, while grocery workers are not receiving any automatic pay increases. Janitors working at businesses that remain open do not necessarily receive any hazard pay, while unemployed janitors who worked at businesses that shut down can collect 158% of their prior wage. After documenting these basic patterns, the authors explore how various alternative UI expansion policies would alter the distribution of replacement rates. We show how the parameters of various simple UI expansion policies shape the entire distribution of UI benefits across workers and thus provide a lens into how policy choices jointly affect liquidity provision, progressivity, and labor supply incentives. View PDF View Working Paper More on this topic Podcasts episode · Oct 21, 2025 Moving to Opportunity: Together? Tess Vigeland and Matthew Notowidigdo When couples move for work, whose career takes the hit? UChicago economist Matt Notowidigdo discusses research showing that when heterosexual couples relocate, men’s incomes increase by 10-15% while women’s earnings barely budge, generating earnings gaps that last for years. Plus,... Topics: Employment & Wages Research Briefs · May 13, 2025 Interactive Research Brief: Measuring the Characteristics and Employment Dynamics of U.S. Inventors Ufuk Akcigit and Nathan Goldschlag Innovation is a key driver of economic growth, and understanding the conditions that lead people to invent new technologies can help reduce inequality between groups as well as help spur growth overall. This project aims to facilitate such efforts using... Topics: Employment & Wages Research Briefs · Oct 2, 2024 Moving to Opportunity, Together Seema Jayachandran, Lea Nassal, Matthew Notowidigdo, Marie Paul, Heather Sarsons, and Elin Sundberg When heterosexual couples in Germany and Sweden relocate, men’s earnings increase by 5-10%, while women’s do not change. Couples are more likely to relocate when the man, rather than the woman, is laid off. These gaps appear at least in... Topics: Employment & Wages
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