Mike Stocker / South Florida Sun Sentinel / Tribune News Service via Getty Images
According to a report from the U.S. Department of Labor, likely more than $ 87 billion in unemployment benefits were withdrawn from the system during the Covid-19 pandemic, much of it due to fraud.
Congress approved many new programs in the early days of the pandemic to support millions of workers who had lost their jobs. These programs, which ended on Labor Day this year, increased weekly benefits, extended the duration of assistance, and expanded the pool of unemployed Americans eligible for payments.
According to an estimate by the Department of Labor's inspector general, which published a semi-annual report for Congress on Monday, the federal government provided a total of $ 872 billion in services as of September 30.
However, the "unprecedented" level of funding has fueled spikes in theft and fraud, according to the watchdog, who reviews the Department of Labor's programs and operations.
It estimates that 10% or more (at least $ 87 billion) of federal money was likely lost to "improper payments," with a "significant portion being due to fraud".
(States that administer benefits may have mistakenly made some payments for non-fraud related reasons, such as processing errors or application errors by applicants.)
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Much of the criminal activity has centered on a temporary program, Pandemic Unemployment Assistance, which labor experts say has expanded assistance to the self-employed, gig workers, and others who are normally not eligible for state unemployment insurance.
The legislature first allows program applicants to certify their entitlement to benefits themselves. (This does not apply to traditional government benefits, which become available after a more thorough review.)
The move helped accelerate aid to ailing households during the deepest recession since the Great Depression; but the lighter requirements, combined with a weekly increase in benefits of $ 600, prompted thieves to take advantage of the system.
Much of the unemployment fraud has been linked to organized crime rings that bought identity information stolen in previous data breaches, the Department of Labor said. Criminals use this information to request benefits on behalf of others.
"I think the unemployment fraud problem was serious and unprecedented, and I believe states were not ready on how stolen identities could be used to take advantage of these programs," said Andrew Stettner, senior fellow and unemployment expert at The Century Foundation, a progressive think tank.
"(However) the states did not have much time to set them up with the right protective measures," said Stettner of the temporary federal programs. "And a more permanent system would certainly help."
The high level of fraud is problematic, but it does not reduce the overall success of the programs from the pandemic era, which have reduced poverty and led to a rapid economic recovery, said Stettner. The expanded unemployment benefits saved 5.5 million people from falling into poverty in 2020, according to the US Census Bureau.
Investigative work related to unemployment benefits has increased 1000 times the usual amount during the pandemic, according to the Inspector General's report. Such work now accounts for 92% of the watchdog's investigative case inventory, up from 12% prior to the pandemic.
Legislators and states have cracked down on the thefts.
In December 2020, for example, Congress passed an aid law that tightened some of the documentation requirements for the use of pandemic services. Many states have implemented identity verification measures. The Department of Labor is also allocating up to $ 240 million to the states to help prevent and combat fraud in both the traditional unemployment programs and the pandemic's unemployment programs.
However, some guarantees have ensnared eligible applicants and delayed assistance.