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Pandemic Unemployment Programs Saved Millions From Severe Hardship, But Permanent UI Needs Reform

| By Nick Gwyn

In response to massive, rapid job loss due to the COVID-19 pandemic, Congress in 2020 passed the most expansive set of temporary unemployment benefits in our nation’s history. These steps were necessary largely because the permanent unemployment insurance (UI) system doesn’t cover many unemployed workers and often provides inadequate benefits. The temporary pandemic unemployment programs significantly increased the coverage, duration, and adequacy of unemployment benefits compared to regular UI, substantially reducing hardship and providing important economic stabilization and impetus for recovery.

As the House Oversight Committee prepares to hold a hearing Wednesday on fraudulent payments under the pandemic unemployment programs, which expired in September 2021, here are few important points to keep in mind.

  1. The pandemic unemployment programs were highly successful in preventing poverty and other hardships. Without these measures, about 5 million more people would have had annual income below the poverty line in 2020, many more would have had less money for food, shelter, and other necessities, and tens of millions of workers not covered by the regular UI system, especially workers of color, would not have received any benefits. The pandemic unemployment benefits produced these enormously beneficial outcomes without holding back job growth, despite rhetoric to the contrary.
  2. These programs were essential in stabilizing an economy that lost a staggering 22 million jobs in just two months in early 2020. Unemployment benefits are an effective economic stabilizer by supporting consumer demand during downturns, considerable research shows. Nonpartisan experts have highlighted the importance of unemployment benefits during the pandemic, including the Federal Reserve Bank of Dallas, which reported that these payments “threw a lifeline to an economy in freefall as the pandemic struck.” 
  3. The pandemic unemployment programs were vulnerable to fraud because of years of administrative neglect and because new programs had to be established rapidly given the limited scope and responsiveness of the regular UI system. Any benefit system would struggle administratively when claims rise by roughly 3,000 percent in a very short time, as happened with UI in the spring of 2020. But years of underfunding UI's administrative infrastructure and the resulting antiquated computer systems and staff shortages made the system particularly vulnerable. Furthermore, in midst of an unprecedented surge in unemployment claims, states had to set up new temporary programs to patch the gaping holes in the regular UI system, further straining their administrative capacity. Less than one-quarter of unemployed workers now receive benefits under the regular UI system, which is in dire need of permanent, comprehensive reform. 
  4. The federal government took significant steps to reduce UI fraud, including many by the Biden Administration. Between April 2020 and September 2021, the Labor Department issued 33 guidance documents related to the pandemic UI programs, including focusing on improving states’ identity verification efforts in April 2021, and encouraging their work with financial institutions to detect suspicious activity in May 2021. A new statutory requirement for claimants under the Pandemic Unemployment Assistance program, which covered those not eligible for regular UI, to provide documentation proving their prior employment or self-employment was implemented in the beginning of 2021. The Labor Department used funds under the 2021 American Rescue Plan Act to give states grants to strengthen identity verification, enhance fraud detection, increase cybersecurity, and expand overpayment recovery, and to send expert “tiger teams” to help states improve their UI program administration.