Hospitality workers wait in line in a basement garage to apply for unemployment benefits in the midst of the coronavirus pandemic. (AP Photo/Marcio Jose Sanchez)

Haven't gotten your unemployment check? That's intentional

"Designed to fail": Many states designed their UI systems to limit payouts, experts say



Igor Derysh
June 6, 2020 2:00PM (UTC)

Nearly one-third of unemployment benefits owed to millions of Americans laid off amid the coronavirus pandemic still haven't been paid out, according to an analysis by Bloomberg.

Treasury Department data shows that it doled out about $146 billion in unemployment benefits between March and May. But the analysis found that the federal government owed about $214 billion in unemployment benefits over that stretch, leaving jobless Americans roughly $67 billion short as millions more continue to file first-time unemployment claims.

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The delays come as the government faces an unprecedented influx of unemployment claims. Yet "the unemployment system is not simply failing because of a historic surge in applications," said Pamela Herd, a professor of public policy at Georgetown University. "In many states, it is designed to fail."

"A system that mails out forgotten internet passwords is designed to fail," she said. "A system that can hold up benefit receipt for weeks or months because of a small error is designed to fail."

"Generally, unemployment insurance in many states is designed to be far more effective at limiting access to benefits for those ineligible than ensuring those eligible actually receive them," Herd told Salon.

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The Labor Department disputed the Bloomberg analysis. A spokesperson for the department argued that the weekly jobless claims reports are "not an effective data point to get at unpaid claims" in a statement to Bloomberg but acknowledged that the department does not track the number of unpaid claims.

"It is also challenging to use these numbers because states are struggling to keep up with demand and some have backlogs they are working through," the spokesperson said.

But the data shows a "huge hole," Jay Shambaugh, an economist at the Brookings Institution, told the outlet. "There's a lot more money that should have gone out that has not gone out."

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Herd told Salon that the $600-per-week federal unemployment benefits approved by Congress back in March have highlighted the "deficiencies" in the system.

"News stories abounded documenting the hours people spent online or over the phone, often times met with crashing websites and disconnected phone lines. Many people ended up waiting months before they received their unemployment benefits," Herd said. "The administrative burdens, in terms of the effort and time spent applying and the long delays to receive benefits, were large. And while we don't know yet how many eligible people never got benefits, there is some evidence that many eligible individuals are facing possible evictions and challenges meeting their children's basic nutrition needs due to the delays."

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Herd pointed to a number of issues with the federal program, noting that there has been "confusion about eligibility" because it varies across states. Many gig workers also "don't know they're eligible for benefits."

"Clear information from the government has been lacking," she said.

But the core problem lies with the state systems themselves, which have produced wildly disparate results. By April, nearly 66% of unemployed Massachusetts residents received benefit payments compared to fewer than 8% of unemployed Florida residents, according to federal data.

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"A thriving economy, and attempts to reduce budgets, led both federal and state governments to try to reduce unemployment insurance claims, as well as the length of time people spend on the program. Florida has been repeatedly highlighted as an egregious example of using administrative burdens to achieve these goals," Herd said. "But Florida is not alone. Recent trends have shown a significant decline in the overall fraction of those unemployed receiving benefits, from around 31% between 2004 and 2007 to 23% between 2012 and 2016."

The change was evident after the 2008 implementation of the Reemployment and Eligibility Assessment program, which was aimed at reducing the amount of time recipients receive benefits.

The program was successful in reducing how long people spend on the program but "a recent evaluation found that half of the reduction in time spent on unemployment due to REA was because beneficiaries failed to fulfill administrative requirements – attending a meeting at the state unemployment office – rather than because they gained employment," Herd explained.

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Herd called out former Wisconsin Gov. Scott Walker and the state's Republican-led legislature for making "countless 'reforms' to UI to reduce spending that made the system impossible to navigate," in a Twitter thread earlier this week.

Data shows that the percentage of unemployed people in the state receiving unemployment benefits fell from 46% in 2010 to 31% in 2019.

"Walker instituted a series of changes that made it harder to apply for benefits, similar to Florida, by making the application process unnecessarily cumbersome, including longer applications and online applications that didn't function well," Herd said. "He also altered how fraud was defined and penalized. If you make any mistake on your application, an application made more confusing by Walker, you're liable for not just the benefit, but a 40% penalty."

As a result of the penalty, Wisconsin has been the only state in the last five years to consistently collect significantly more than the benefits it mistakenly distributed.

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"Since 2015 they've collected 160% of 'owed' benefits," Herd explained. "Basically, [Wisconsin], due to changes pushed by the GOP, has been spending far more energy and time taking money from unemployed people who made genuine mistakes on confusing forms, generated by the GOP, than it has been ensuring unemployed people are getting needed help."

Even as states throw up hurdles for the more than 40 million people who have lost their jobs during the pandemic, Republican lawmakers in Washington have already vowed to reject any extension of the federal benefits when they expire at the end of July. Republicans have argued that many unemployment benefits are greater than the salaries workers received at the jobs they lost and employers are having a difficult time bringing them back. Some states are even encouraging companies to report workers who do not want to return to work due to fears of the coronavirus to boot them from the unemployment program.

May's jobs report released on Friday showed a surprising decrease in the unemployment rate, though the number excluded workers that are classified as still employed but "absent from work." The unemployment rate among black and Hispanic Americans remains much higher.

The unexpected dip suggests that the trillions spent by Congress and the Federal Reserve helped prevent some worst-case scenarios, but Republicans quickly argued that it was proof that there was no need for more spending to help workers.

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"This definitively kills any chance of trillions of new spending," a Republican Senate aide told The Washington Post.

But economists warned that was the exact wrong takeaway from the report.

"This is how one good jobs report can turn into a nightmare scenario," said Ernie Tedeschi, a former Treasury Department economist who is now an analyst at Evercore ISI. "This is exactly backwards, like stopping an antibiotic prematurely because you start to feel better. This is the first jobs report to reflect our fiscal response at full capacity. If we let support expire too soon, we could have a double-dip downturn."

Senate Majority Leader Chuck Schumer, D-N.Y., echoed that sentiment.

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"The stimulus helped get the economy going, but we need a lot more. A 13% unemployment is not a time to get joyous," he said on Friday. "The action we did helped break the worst of this recession. But if we don't do more, we could slide right back, right back, and it could be even worse. I hope and pray that Trump and the Republicans don't take this as a sign to be complacent."


Igor Derysh

Igor Derysh is a staff writer at Salon. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

Tips/Email: iderysh@salon.com Twitter: @IgorDerysh

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