The Impact of Unemployment Insurance Benefit Cuts on Mental Health: Evidence From Early Pandemic Program Expirations.

This study is the first to estimate the effects of unemployment insurance (UI) benefit contractions on mental health. We leverage a unique quasi-natural experiment: early termination of the Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Unemployment Assistance (PUA) programs across more than 20 states during the summer of 2021. Using high-frequency data from the Census Bureau's Household Pulse Survey (HPS), our difference-in-differences estimates suggest that early withdrawal from FPUC and PUA increases the probability of reporting anxiety symptoms among working-age adults without a college degree, a group particularly vulnerable to unexpected income shocks. The adverse effects are more pronounced among racial and ethnic minorities, older individuals, and women. However, the increase in anxiety symptoms is short-lived, persisting for about 1 month after the benefit cessation. Finally, we find evidence that financial hardship is a likely mechanism underlying these findings.