“The federal government sent billions in unemployment aid to ineligible beneficiaries and outright fraudsters during the pandemic, according to a new watchdog report. At least $78 billion in jobless benefits, and potentially much more, were misspent during fiscal year 2021, according to a Tuesday report from the Government Accountability Office (GAO).
“Not only is the system falling short in meeting the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the stewardship of government funds,” said GAO head Gene Dorado in a press release yesterday, who called the report’s findings “extremely troubling.”
The Congressional watchdog agency has rated the unemployment insurance system as “high risk” for waste, fraud, and abuse and called on lawmakers and the administration to undertake immediate reforms.
The federal government’s unemployment insurance system—jointly administered by the Department of Labor and a patchwork of state agencies—has long struggled with making improper payments. This problem only got worse during the pandemic, when Congress dumped billions more into an expanded number of unemployment assistance programs.
The GAO found that the improper payment rate jumped from 9 percent in the pre-pandemic fiscal year 2020 to 18.9 percent the next year. That means nearly one in five unemployment insurance dollars went to an ineligible or overpaid beneficiary.
There are multiple reasons for this sharp rise in improper payments.
The GAO reports that some states’ legacy 40- and 50-year-old information technology systems used to administer benefits weren’t up to the task of identifying potential fraud or overpayments. These same systems also struggled to handle totally new benefit programs covering self-employed workers like rideshare drivers, who typically aren’t covered by unemployment insurance.
Federal rules on who was eligible to receive benefits were also “untimely and unclear,” according to the GAO report. Some state officials told the agency they’d already set up programs and started sending money out the door by the time Labor Department guidance came down.
The massive increase in available unemployment funds also increased the rate of improper payments. Federal funding for unemployment benefits jumped from $86.9 billion in fiscal year 2020 to $410 billion in fiscal year 2021.
States often struggled to hire enough people to administer these new benefits. The staff they did hire were often undertrained.
The huge increase in unemployment benefits also became a target for fraudsters. The GAO reports that 146 people have pleaded guilty to federal charges of defrauding unemployment systems. In California, for instance, the state paid an estimated $400 million on fraudulent claims made in the name of state prison inmates.”
“State and local governments are struggling to hire and retain workers amid a tight labor market, even as private-sector employment is reaching pre-pandemic levels.
Despite an influx of federal cash they received in response to Covid-19 — much of which remains unspent — and their own booming revenues, governments are having a hard time competing for workers as salaries at private companies rise.
Economists and unions warn that if public-sector employers can’t reverse the trend, it will erode the quality of services like education and slow the overall economic recovery. ”
“Altogether, the public sector has gained back 53 percent of the jobs lost since February 2020, a ZipRecruiter analysis of Bureau of Labor Statistics data found. The private sector has won back 93 percent.”
“Economists cite a historically tight labor market as one driver of the discrepancy. Employers in every industry are struggling to attract and retain talent, which has put upward pressure on pay and perks such as remote work that governments thus far have been unable to match.
There were a record 11.3 million job openings in January, the most recent month for which data is available — about 5 million more than there are employed workers. At the same time, average hourly earnings have surpassed $31 — a more than 5 percent increase from the previous year.
The year-over-year growth rate for hourly private-sector salaries and wages in each of the past four quarters has exceeded that for state and local governments by the largest margin on record, according to a Pew analysis of Labor Department data.
“Really across the board, many governments are often facing intense competition for workers,” Mike Maciag, who studies the government sector at The Pew Charitable Trusts, said. “Slower [public-sector] wage growth is playing a major role in hindering efforts by a lot of governments to fill openings and retain workers.”
Maciag points to a recent report from Arkansas’ Office of Personnel Management that found competing offers from Walmart, McDonald’s, Amazon and the like were impeding that state’s efforts to fill some positions. All paid significantly more than the state for entry-level jobs — despite the fact that the “complexity and responsibility” of the government roles “far exceeded” that of the private-sector ones, according to the report.”
“The Fed has penciled in three rate hikes this year, and the first could come as soon as March.”
“Adam Ozimek, chief economist at freelancing platform Upwork, said the Fed misjudged how large the inflation spike would be, though he still thinks — as the Fed previously argued — that price increases will eventually start to cool on their own. He said the danger instead is that the Fed will overreact to levels of inflation that ultimately prove temporary, hurting the millions who still haven’t returned to the labor force.
“Inflation is by any measure extremely high, yet labor slack remains significant as well and we are far from full employment,” he said. “The policy challenge is far more complicated than in 2018, when Powell faced uncertainty about labor slack but without the added pressure of high inflation.”
Still, others have praised the Fed’s restraint amid the price spikes, keeping rates low and allowing the job market to heal more quickly. They argue that inflation is significantly being fed by supply chain issues that the central bank isn’t equipped to solve.
Former Fed Chair William McChesney Martin once said the central bank’s job was “to take away the punch bowl just as the party gets going.” But Sahm argued that a few rate increases don’t have to ruin anything.
“Things are getting better,” she said. “We need to pour a little less punch in the punch bowl.””
“Data from the Kauffman Foundation indicate that the percent of new entrepreneurs who created a business by choice instead of necessity dropped from 86.86 percent in 2019 to 69.75 percent last year. Many people happy to work for somebody else were pushed into starting a business by pandemic-era chaos.
But a lot of those people seem to have discovered that they actually like working for themselves, and that may be causing a cultural shift. At the end of November, The Wall Street Journal reported that at least part of the “Great Resignation” phenomenon of Americans quitting jobs involved people starting businesses.”
“Employers in almost every industry say they’re struggling to find workers, but the situation is especially severe in the leisure and hospitality sector. While workers in these industries are getting paid more than ever, it still doesn’t seem like enough. Bars, restaurants, and hotels across the country are posting signs advertising open jobs — or asking customers to be patient since they don’t have enough staff. In August, the latest available month for openings and turnover data from the Bureau of Labor Statistics (BLS), there were a near-record 1.7 million open jobs in leisure and hospitality — 10 percent of all jobs in the sector — and a record of nearly a million people quitting.”
“when individual states rescinded their unemployment benefits this summer, it didn’t have a meaningful impact on the worker shortage in many industries, including leisure and hospitality. Data from September, when the benefits were cut on a federal level, show a similar story, suggesting there are reasons beyond financial keeping people from taking these jobs.”
“More people are turning to gig work than ever before, but since these jobs usually don’t come with employer benefits, their proliferation could worsen inequality for millions of Americans.
The number of people employed in nontraditional ways in the US rose to a record 51 million this year, an unprecedented 34 percent jump compared to 2020, according to new data from MBO Partners, a company that provides business solutions to the independent workforce and has conducted a long-running study of the group. These types of workers — which include contract workers, people who are self-employed, temporary and on-call workers, and those who get short-term jobs through online apps or marketplaces — are now equivalent to a third of US employment.”
“The economy added 266,000 jobs in April according to today’s report from the Bureau of Labor Statistics (BLS), while the unemployment rate ticked up slightly to 6.1 percent, from 6 percent.
These numbers are well below forecasts from economists who predicted that April would see the addition of around 1 million jobs, and the unemployment rate falling to 5.8 percent. The BLS report notes that we’re still far away from a pre-pandemic labor market, when the jobless rate sat at 3.5 percent.
Despite persistent levels of high joblessness, other metrics show signs of a labor market that’s increasingly tight.”
“job openings and the number of workers quitting their jobs were at record highs and that wages were growing at 2019 levels (when the country’s economy was booming).
Employers, meanwhile, find themselves in increasingly dire straits trying to find new workers.”
“what’s causing this weird mismatch between labor supply and demand?
Furman and Powell cite three possible explanations: continual health concerns about contracting COVID-19 at work encouraging some people to stay home, school closures keeping parents out of the workforce, and generous unemployment benefits.
The $300 weekly unemployment supplement provided as part of the March-passed American Rescue Plan pays some 42 percent of workers more than what they made at their old jobs, according to a University of Chicago analysis.
That $300 supplement will continue until September 2021. Today’s jobs report has business interests calling for ending it now.”
“The consensus among economists is that high unemployment benefits were not producing high unemployment rates earlier in the pandemic, when there were so few jobs available, health concerns were more acute, and there was greater uncertainty about when the economy would improve.
Workers who found themselves in that precarious situation would jump at any employment opportunity they could find, even if it paid less than unemployment benefits, the thinking went.
The situation today is much different.
Vaccinations and falling cases and deaths should ameliorate many of the health concerns people have about returning to work. A wealth of job opportunities also means people receiving unemployment benefits now won’t automatically take whatever work they can find. Instead, they can afford to hold out for higher wages or a job that’s a better fit for them.”
“robust as the response was, the crisis exposed the fragility of the UI system. Technically, America’s process for handling unemployment claims was built on antiquated computer systems (some written in COBOL, a language largely abandoned in the 1980s), and millions of workers endured weeks of delays in getting their benefits.
So a major priority for Congress in 2021 has to be reforming the UI system: improving its functionality and making it more generous.”