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How Much Have We Overpaid for Unemployment?

Last year, the federal government and states overpaid unemployment benefits by $14 billion.

And how does a $14 billion overpayment happen?  The Labor Department has four key reasons for improper payouts of jobless benefits:

  1. Payments to individuals who continue to claim benefits even though they have returned to work (Benefit Year Earnings)

  2. Failure of former employers to provide timely information on the reason an individual is no longer working (Separation)

  3. Payments to unemployed individuals who have stopped searching for a job (Work Search)

  4. Payments to individuals who have not registered with the state’s Employment Service (ES Registration)

                                   2011 Improper Payments

Source: US Department of Labor

And with those errors, the unemployment insurance program has the second highest “improper payment” rate of all federal programs (the National School Lunch Program has the highest rate).

And even with $14 billion hanging in the balance, there were only around 2,700 convictions for fraud related to jobless benefits last year.

The Labor Department and states are trying to recoup some of the lost funds.  That won’t be easy.

Thirteen states have improper payment rates over 14%.

Source: US Department of Labor

Last year’s overpayments equaled 11% of all jobless benefits.  But as bad as $14 billion sounds, its actually an improvement…in 2010 the rate was 11.35%.  Still, a slight improvement doesn’t take away from the fact that there is an enormous amount of waste and abuse in the unemployment system, and it doesn’t take away from the fact that there is some serious bureaucratic ineptitude to blame.


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