The CARES Act resulted in many unemployed workers receiving benefits that exceeded wages at their previous job. Given this, would an unemployed worker reject an offer to return to their former job at the same wage? Qualitatively, we provide a very simple dynamic model that incorporates four reasons the answer could be ‘no’: (i) the temporary nature of the CARES Act, (ii) uncertainty that their return-to-work offer might expire, (iii) search frictions, and (iv) wage losses out of unemployment in a recession. Quantitatively, when evaluated under empirically relevant parameters, we find it unlikely a worker would reject an offer to return to work at the same wage. We show special cases where this is not true and relate these to anecdotal evidence.

More Research From These Scholars

White Paper Apr 2, 2020

Characteristics of Workers in Low Work-From-Home and High Personal-Proximity Occupations

Simon Mongey, Alex Weinberg
Topics:  COVID-19, Employment & Wages
BFI Working Paper Mar 24, 2020

An SEIR Infectious Disease Model with Testing and Conditional Quarantine

David Berger, Kyle Herkenhoff, Simon Mongey
Topics:  COVID-19
BFI Working Paper Jun 15, 2020

Socioeconomic Network Heterogeneity and Pandemic Policy Response

Mohammad Akbarpour, Cody Cook, Aude Marzuoli, Simon Mongey, Abhishek Nagaraj, Matteo Saccarola, Pietro Tebaldi, Shoshana Vasserman, Hanbin Yang
Topics:  COVID-19