Pandemic Unemployment Assistance as an Asymmetric Incentive Among Gender-Racial Demographics

COVID-19 created a unique economic downturn in which normal business practices were forced to come to a halt, resulting in the closure of firms, the shift to remote work, and a rise in national unemployment. While unemployment was felt at the macro level for all demographics, research has shown that women and minorities, particularly those of Hispanic ethnicity, had disproportionately higher levels of unemployment in April 2020 and the subsequent months that followed. In response to the financial crisis that ensued, the CARES Act enabled Pandemic Unemployment Assistance to be extended to cover those impacted by COVID-19, including the self-employed. With an estimated 1 in 4 American workers reliant on Pandemic Unemployment Assistance at some point throughout the pandemic with federal benefits totaling $600 weekly, questions regarding the extent to which PUA was an incentive to remain unemployed emerged, particularly for those with low pre-pandemic incomes. Using 2020 CPS microdata, this study seeks to further previous findings surrounding racial and gender unemployment asymmetries and will analyze the effect of federal and state aid as an incentive to remain unemployed even as COVID-19 restrictions and fears subsided. While PUA provided an economic incentive for all American workers, the results show that this incentive is much stronger for those with a lower pre-pandemic income, indicating that incentives matter more the lower the income is for an individual. Additionally, women were more incentivized than men of all races and ethnicities, which supports my initial hypothesis based on the findings of Gezici & Ozay (2020). This study draws attention to a larger systemic problem within the American workplace, wherein educational, gendered, and racial barriers make certain people economically better off remaining unemployed rather than having the opportunity to be financially secure in their respective fields of employment.