Impacts of the COVID-19 Pandemic and the CARES Act on Earnings and Inequality

Upjohn Institute Working Paper; 20-332

42 Pages Posted: 11 Sep 2020 Last revised: 12 Sep 2020

See all articles by Guido Matias Cortes

Guido Matias Cortes

York University

Eliza Forsythe

University of Illinois at Urbana-Champaign

Multiple version iconThere are 2 versions of this paper

Date Written: September 8, 2020


Using data from the Current Population Survey (CPS), we show that the COVID-19 pandemic led to a loss of aggregate real labor earnings of more than $250 billion between March and July 2020. By exploiting the panel structure of the CPS, we show that the decline in aggregate earnings was entirely driven by declines in employment; individuals who remained employed did not experience any atypical earnings changes. We find that job losses were substantially larger among workers in low-paying jobs. This led to a dramatic increase in inequality in labor earnings during the pandemic. Simulating standard unemployment benefits and Unemployment Insurance (UI) provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, we estimate that UI payments exceeded total pandemic earnings losses between March and July 2020 by $9 billion. Workers who were previously in the bottom third of the earnings distribution received 49% of the pandemic-associated UI and CARES benefits, reversing the increases in labor earnings inequality. These lower-income individuals are likely to have a high fiscal multiplier, suggesting these extra payments may have helped stimulate aggregate demand.

Keywords: COVID-19, employment, earnings replacement, unemployment insurance, CARES Act, distributional impacts

JEL Classification: H31, I38, J31, J38, J65

Suggested Citation

Cortes, Guido Matias and Forsythe, Eliza, Impacts of the COVID-19 Pandemic and the CARES Act on Earnings and Inequality (September 8, 2020). Upjohn Institute Working Paper; 20-332, Available at SSRN: or

Guido Matias Cortes

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Eliza Forsythe (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

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