A recent study by the National Bureau of Economic Research (NBER) has concluded that more generous unemployment benefits ultimately lead to people finding better jobs–ones more suited to their skills.

The $600 a week supplemental unemployment benefit has emerged as a major sticking point in ongoing negotiations over the next round of COVID-19 aid. Congressional Republicans have been staunchly against extending the aid in its current form over fears that it will be a disincentive to work, believing that businesses won't be able to get the staff they need if people can make more money by being on unemployment. The NBER paper challenges this conclusion, saying that "we find the UI [unemployment insurance] extensions introduced in the U.S. improved the quality of worker-job matches."

In reaching this conclusion, the researchers looked at similar extensions in the last two recessions. The paper noted that temporary federal benefit supplements have been put in place in every recession since the 1950s, though under different names. The 2002 program provided additional benefits for up to 72 weeks, depending on an individual state's unemployment rate. The last recession's program allowed for, theoretically, up to 99 weeks of benefits, depending, once again, on a particular state's unemployment rate (the program was extended several times to get to this point; originally, it offered just 13 weeks of benefits.) In normal times, the paper said, states on average grant 26 weeks of benefits.

Their primary source of data was the Longitudinal Employer-Household Dynamics, which consists of restricted microdata information on earnings disbursements paid by employers to their employees as part of unemployment insurance. Those records cover nearly all private-sector employment as well as state and local government employment. This was supplemented with data from the Current Population Survey.

The researchers restricted their analysis to a "main job," that is a job with an employer where a worker earns most of his or her earnings in a quarter. The sample consisted only of workers aged between 20 and 65 who had two different employers between 2000 and 2013. This resulted in a final sample of 100 million people for the period of 2000-2013 and 82 million for the period of 2008-2013.

The paper, after going through what reads as a very complex set of mathematical calculations, said that longer periods of unemployment insurance are linked with employers and employees being better matched for each other: basically, good workers are more likely to end up at good firms. They also found that the longer unemployment insurance benefits go on, the more likely it is the worker will eventually end up in a job that matches their skill level and educational attainment. The logic, basically, is that when workers don't feel pressure to get a new job right away, they can hold out for better jobs.

"In particular, we find that UI benefits those who are more likely to be liquidity constrained by allowing them to search for a longer period of time until they find jobs better fit to their skills," said the paper's conclusion.

This effect, however, does not mean that every worker winds up making more money or working at a better firm. It noted that the improved sorting effect not only means that good workers are more likely to wind up at good firms, but that bad workers are also more likely to end up at bad firms.

"Thus, lower performing workers may now earn less because they are no longer matched with higher productivity firms," said the paper. "While more even matches may be efficient, more balanced matches may reduce earnings for lower performing workers who may had previously been able to find a job with a better employer."

On the other hand, the paper found that "UI can improve the likelihood that lower performing workers are now able to get a job rather than remain unemployed because other jobs are now freed up by UI recipients moving to better jobs."

As the economic damage continues throughout the country, the pressure is mounting for the government to come up with some sort of plan, said Bloomberg. Congressional Democrats have, in response to frustrations with Republican legislators, apparently taken to directly negotiating with the White House, and both sides said they expect to see a deal by the end of this week. Others, however, are less optimistic and believe talks could continue for weeks more.