Finance

Labor Department Gives $653 Million To States For Unemployment Fixes, Following Widespread Fraudulent Covid Claims

05/27/2023
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Topline

The Labor Department unveiled a $653 million grant project for states to make critical upgrades to their unemployment insurance technology systems Friday afternoon—primarily to defend against fraud—as states struggle with widespread fraudulent Covid-era unemployment claims that likely cost them tens of billions of dollars.

Key Facts

The funding comes from the American Rescue Plan Act, signed in March 2021 by President Joe Biden, and will be administered by the Employment and Training Administration, the Labor Department announced in a statement Friday afternoon.

The grants are intended to allow states to modernize their “vulnerable” unemployment IT systems, giving states more leeway to provide payments through “modular and evidence-driven approaches,” the Labor Department stated.

The announcement comes after more than a million unemployed U.S. workers filed unemployment claims every week for a year during the Covid-19 pandemic, as stay-at-home orders and capacity restrictions led employers to shutter their doors.

It comes one month after the Labor Department announced another $200 million in grants to improve states’ ID verification for unemployment, designed to “prevent and detect future fraud more effectively.”

Big Number

$60 billion. That’s how much was paid in fraudulent employment insurance claims during the pandemic, according to data released late last year by the federal non-partisan Government Accountability Office, which stated the real number is “perhaps much higher.”

Contra

Lagging technology combined with understaffing contributed to a vulnerable unemployment system during the pandemic, which became overwhelmed when the U.S. jobless rate skyrocketed to nearly 15% in April 2020, according to data from the Bureau of Labor Statistics, while federal relief through the CARES Act temporarily added another $600 in weekly unemployment benefits per person. Those systems continued to lag as inflation surged last year and remain “unprepared” for another recession, according to a report released in December by the Century Foundation.

Further Reading

US Labor Department providing $653 million to help states upgrade UI systems (Reuters)

Source: https://www.forbes.com/sites/brianbushard/2023/05/26/labor-department-gives-653-million-to-states-for-unemployment-fixes-following-widespread-fraudulent-covid-claims/