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Series: Class Notes
People walk on the esplanade of La Defense, in the financial and business district, west of Paris, France, October 6, 2017. REUTERS/Charles Platiau - RC1B9BB86D30
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Class Notes: Food consumption and test scores, CARES Act unemployment benefits, and more

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This week in Class Notes:

Unemployment benefits under the CARES Act had no major negative effects on employment levels

The Federal Pandemic Unemployment Compensation (FPUC) program, introduced under the CARES Act, provided a $600 weekly boost to unemployment insurance (UI) benefits. When the program began in March 2020, it led to an unprecedented rise in the replacement rate (the proportion of pre-tax wages covered by unemployment benefits). The rate shot up overnight from roughly 48% to 145% before dropping again when the benefits expired in July. Arindrajit Dube exploits the abrupt changes in the replacement rate to study the effect on employment. Using high-frequency data from the Census Household Pulse Survey, Dube finds that the increased UI benefits did not disincentivize labor supply, or reduce job creation. Focusing only on non-college graduates and low-income households, who make up the majority of UI recipients, the study still finds only minimal employment effects from the FPUC. This suggests that the costs of providing very high benefit levels during deep downturns may be fairly small.

The recovery that followed the Great Recession led to the longest economic expansion in US history

The 2008 Great Recession was the most substantial negative shock to the U.S. economy since the Great Depression. GDP contracted by 4% and the unemployment rate peaked at 10%. However, the initial downturn was followed by an unusually long and steady recovery that lasted until March 2020 when the COVID-19 recession began. Jay Shambaugh and Michael Strain look at a series of economic indicators throughout the 2010s to understand the dynamics of the recovery. They find that this period represents the longest economic expansion in modern U.S. history, with both the longest positive job streak and an output expansion lasting more than a decade. In the early years of the recovery, high-income workers saw real wages rise while the bottom quintile and median worker saw wages fall. By the second half of the recovery, the trends changed; wages grew most rapidly for workers in the bottom quintile and median wages rose. This was in part the result of increases in the minimum wage at the state and local levels. The authors conclude that low-income workers are more sensitive to business cycle fluctuations, so fiscal and monetary policy must respond aggressively to economic downturns to ensure the benefits of a recovery reach everyone.

Variations in food consumption induced by SNAP benefits impact test scores and college attendance rates for low-income students

Every year, 41 million Americans rely on Supplemental Nutrition Assistance Program (SNAP) benefits to purchase food. Studies have shown that households increase the quantity and quality of their food expenditures right after monthly SNAP benefits are disbursed. But as the weeks go by, households decrease consumption, creating a “calorie crunch” just before their next disbursement. Timothy N. Bond and his coauthors study how the timing of SNAP benefits, which varies across states, affects SAT scores and college attendance among low-income high school students. Using individual-level data on test scores and college attendance in eight states, the authors find that low-income students that take the SAT within two weeks of their SNAP issuance date score around six points higher than those who take the test more than two weeks after receiving benefits. SAT scores impact college enrollment, and the authors estimate that in the eight states they studied, the SAT performance loss due to SNAP benefit timing results in around 1,100 fewer students attending a four-year college. 

Top chart: The Democrats’ COVID-19 relief plan would expand ACA coverage and make it more affordable

This week’s top chart shows that the Democrats’ COVID-19 relief plan would make healthcare coverage under the ACA more affordable for all eligible income groups. An estimated four to five million people would gain coverage as a result of the lower monthly premiums.

Cares Act effect on ACA

Chart source: Vox

Choice opinion: Biden can fix America’s racist housing rules

“Exclusionary zoning laws essentially trap many Black families into low-income neighborhoods by pricing them out of richer ones. Ending residential segregation would allow Americans to move from poor neighborhoods or cities to richer ones and allow lower-skilled workers to find better-paying jobs… Biden can tie public concern over racial justice to tangible changes people can make at the local level. He can also tie federal dollars to mandates to reduce exclusionary zoning. And if all else fails, his administration can sue the jurisdictions that are knowingly perpetuating segregation,” writes Jerusalem Demsas.

Self-promotion: A mixed-methods analysis of the middle class time squeeze

In 2019, we conducted a series of focus groups with over 100 middle-class Americans to better understand the well-being of the middle class. One area we studied is the use of time and the balance between work and other aspects of daily life. We find that work has increasingly played a central role in how middle-class Americans think about and utilize their time. In a new report, Tiffany N. Ford, Jennifer M. Silva, Morgan Welch and Isabel V. Sawhill study the causes of this “middle class time squeeze” and explore policy solutions. Through qualitative analyses, they find that the centrality of work in determining time use has a negative impact on well-being. It also has direct implications for the health, relationships, and overall sense of autonomy and purpose of the middle class. To alleviate the pressure of the time squeeze, the authors propose policies like reducing the standard work week, aligning workdays with school days, and expanding paid family leave.

For your calendar: opportunity zones, supporting Latino entrepreneurs, and the role of families in human flourishing 

Opportunity Zones: The early evidence, Brookings Institution

    • Wednesday, February 24, 2021 10:00 AM – 4:30 PM EST 

Supporting Latino and Immigrant Entrepreneurs in a Time of Crisis,

    • Thursday, February 25, 2021 3:00 PM – 4:00 PM EST 

The role of families in human flourishing: A conversation with James Heckman

    • Thursday, February 25, 2021 4:00 PM – 5:15 PM EST

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