Overview
The coronavirus pandemic tested the nation’s unemployment benefits system more than any prior recession. Not only did far more individuals file claims for weekly benefits than ever before, but lockdowns and mass layoffs concentrated those record claims starting in March 2020, creating an unprecedented surge in demand for benefits that quickly rose to an apparent 33 million claims by June 2020.[1] That soaring demand for assistance, accompanied by unprecedented federal benefit expansions, also created unprecedented opportunities for everyone from small-time crooks to international criminal organizations to defraud the nation’s unemployment benefits system.[2]
The scale of improper spending and outright fraud is only now coming into clearer focus. Official federal estimates, while still preliminary, are astonishing. Based on an assumed improper payment rate of more than 21 percent, government officials have conservatively estimated at least $191 billion in improper payments during the pandemic. However, that figure is expected to rise, likely to $240 billion or more, following a recent Government Accountability Office (GAO) report that found a major federal program had an even higher improper payment rate of almost 36 percent. Private estimates suggest improper payments may reach $400 billion. GAO separately estimates between $100 billion and $135 billion in unemployment benefits were lost to fraud during the pandemic, or approximately one in every seven dollars in benefits paid. Policymakers owe American taxpayers an explanation for this unprecedented abuse, starting with how it occurred and what can be done to prevent a repeat. Providing solutions to reduce improper unemployment payments starts with answering those and other questions, which requires an understanding of the complicated principles and policies that underpin the nation’s federal/state Unemployment Insurance (UI) system. But the issues do not stop there. They also involve critical policy mistakes embedded in temporary federal programs created to assist Americans during the pandemic.
[1] Department of Labor, “Unemployment Insurance Weekly Claims,” July 9, 2020,
https://oui.doleta.gov/press/2020/070920.pdf
[2] For a discussion of the involvement of international criminal organizations, see Matt Weidinger, “Did Russian Gangs Steal More from US Taxpayers Than We Gave Ukrainians to Defend Themselves?” Washington Examiner, November 18, 2022, https://www.aei.org/op-eds/did-russian-gangs-steal-more-from-us-taxpayers-than-we-gavukrainians-to-defend-themselves