The July 2020 survey revealed Americans planning to spend an average of 40 percent of their relief checks—lower than the 50–90 percent of the 2008 tax rebates. At the same time, there were stark differences among households, the researchers report.
“Many spent their entire stimulus payment, and just as many saved their entire check or used it to pay off debt,” they write. Men and Hispanics were more likely than the average respondent to spend. Black respondents were more likely to pay off debt. That was also true of liquidity-constrained respondents, defined as people who said they would struggle to cover an unexpected bill equal to one month of their after-tax salary. People whose earnings fell because of COVID-19 tended to use more of their checks on spending.
Coibion, Gorodnichenko, and Weber also investigated how the checks might affect the labor market. They find that 20 percent of people out of work report that the check led them to search harder for a job.
Part of the argument against another relief act has been that giving people money deters them from looking for work. However, “contrary to demotivating this group, the checks might have meant they now had money for babysitters or transportation, the sort of things you might need in order to find a job,” Weber says.
As for the checks’ limited success in spurring spending, the relief measures were up against a big challenge in the form of lockdowns, which damped the ability to, say, dine out or the desire to book a holiday package. But uncertainty related to the pandemic may also have played a role—as might have the mechanism of one-off payments itself.
There may be a limit, the researchers write, “on how much stimulus can be generated through direct transfers to households. In the face of large crises, government may want to consider a broad range of policies targeting aggregate demand.”