Document Type

Report

Publication Date

9-30-2020

Research Center

Center for Economic Development

Abstract

The COVID-19 pandemic has had a significant effect on all aspects of social, economic, and political life worldwide. In the United States, millions of people have tested positive for COVID-19, and over 200,000 people have died from the virus. While Ohio’s governor and director of public health have been credited for their quick decision-making in response to the pandemic, Ohio’s communities still suffered, with well over 100,000 cases and thousands of COVID-19-related deaths statewide.

Policymakers aiming to reduce the spread of COVID-19 were forced to make difficult tradeoffs between public health and the economy. On March 23, 2020, Governor Mike DeWine’s stay-at-home order started. This executive order mandated only essential businesses could remain open. Consequently, many Ohioans faced lay-offs or furloughs, filing over 1.6 million unemployment claims between March and August 2020—more than the last four years combined. Cuyahoga County was not immune to this economic downturn; unemployment increased by 19 percentage points in four months. Low-wage jobs in the Accommodation and Food Services industries were hit hardest,4 meaning the county’s most economically vulnerable residents were most likely to experience lost wages. After a phase-in of re-openings, the stay-at-home order ended on May 29th. Unemployment rates, while falling, remain above those in 2019.

In response to the pandemic’s economic impact, the federal government enacted landmark policy. The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act aimed to reduce the financial burden and provide a safety net through the expansion of unemployment benefits, provision of stimulus payments to eligible Americans, and postponed loan payments, among other things. Most relevant to this analysis is an additional $600 per week of unemployment benefits available to individuals affected by COVID-19. These benefits were available between March 29th and July 25th, which includes nine of the ten weeks of Ohio’s stay-at-home order. This research brief provides insight into the effects of unemployment insurance (UI) benefits and the Earned Income Tax Credit (EITC) on wage replacement rates, as well as policy recommendations regarding UI and EITC in response to the COVID-19 pandemic. While we find UI and EITC benefits replaced the lost wages for most of the county’s economically vulnerable workers, we urge continued policy intervention to mitigate the consequences of the pandemic.

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