Economy & Work

Unsanitized: The Precarious State Unemployment Systems

Unsanitized: The Precarious State Unemployment Systems

MIAMI SPRINGS, FLORIDA - JULY 16: Carlos Ponce joins other demonstrators participating in a protest asking Senators to support the continuation of unemployment benefits on July 16, 2020 in Miami Springs, Florida. The protesters were asking Senators to support the new Schumer/Wyden legislation that extends unemployment benefits for all laid-off Americans as the coronavirus pandemic continues to disrupt the economy. (Photo by Joe Raedle/Getty Images)

This article is adapted from Unsanitized: The Election Daily Report put out by The American Prospect. You can find the original publication here.

First Response

There’s an incredible scandal happening here in California around unemployment insurance. A ring of scam artists filed 21,000 benefit claims to incarcerated people throughout the state, including high-profile inmates on Death Row like Scott Peterson. The cost so far has just been upped to $400 million. There have been charges against small cells in the ring, but it’s unclear who filed fraudulent claims at this level, and whether it was an inside job.

This is a small amount of the $109 billion California has paid out in unemployment since March, though the number of accounts flagged for fraud is about 30 times higher than the prison ring. The bigger problem is that the state has taken a hammer to the entire system while it tries to figure out which claimants actually qualify for unemployment and which are fraudulent.

In late September, the state paused new claims for two weeks to institute a more secure system. With the revelations of the prison fraud, the state system has been frozen again, with 350,000 debit cards frozen. Bank of America manages the debit card system through an exclusive contract, and there have been countless reports of money clawed back when it should not have been, frozen cards that should be unfrozen, and backlogs in the hundreds of thousands. This is critical, as California is one of only three states with no other option for unemployment benefits than a BofA debit card. Most states have debit cards as an option, and four banks run most systems (BofA, Key Bank, Comerica and U.S. Bank).

The near-term impact of all this is probably that the head of the state Department of Labor, Julie Su, who was pitched as a potential Secretary of Labor in a Biden cabinet, is not going to get the job. I’ve heard good things, but presiding over the California unemployment system right now is a bad look.

The bigger impact is that the unemployment system itself, and the statistics that the federal government supplies on it, are being called into question. Since those numbers form a large basis of the economic picture and the need for additional support, having unreliable figures is really bad. Yet that’s what we’re dealing with, says a new report from the Government Accountability Office.

Not only did GAO find that the weekly first-time jobless claim report is consistently inaccurate, both with undercounts that ignore backlogs and overcounts due to double-counting, but those with Pandemic Unemployment Assistance (PUA), the program instituted to help independent contractors and freelancers, are being underpaid. Many states implemented PUA but just paid out the minimum level for millions of participants, putting income under the poverty line in 70 percent of the states studied. Of course, PUA goes away on December 26, replacing that minimum payment with nothing.

Inaccurate data is brutal. Furthermore, we entrusted the main individual payout for millions of desperate people to state unemployment systems of generally poor quality, which allowed far too many to slip through the cracks. If the pandemic isn’t an argument to federalize unemployment, or at the very least standardize benefit eligibility and delivery so Bank of America cannot play havoc with people’s lives based on one lucrative contract in California, we’ll never do it.

Blessed Are the Dealmakers

One thing I’ve been repeating consistently about COVID relief is how easy it would be to put something together to solve the problem. We know we’re about six months out from widespread vaccine take-up. We know the major factors that cause community spread. So a limited but robust program that allows people to stay home, lets the attendant businesses survive, fills the state and local budget gaps, and perhaps most important, provides the money to actually get the vaccine distributed around the country would do the job.

So a bipartisan group of Senators went ahead and put together a deal that does just that. Only because it’s a bipartisan group of Senators, it’s not quite as good as it needs to be, it adds in completely unnecessary elements, and it’s more about the vanity of these politicians showing themselves to be above politics than anything else.

This deal continues to make the mistake of not building something coherent. It includes a $300/week expansion of unemployment insurance, $300 billion more for the flawed PPP program, $240 billion in state and local grants, $50 billion for vaccine distribution and health measures, and a temporary (six-month) liability shield for corporations where workers or employees are infected. There’s also transit funding and rental assistance.

The vaccine money (which should be an immediate disaster relief package) is good. State/local isn’t enough but it’s a start; same with transit and rental assistance. The liability shield is downright ghoulish, a license to kill. But you have a boost to UI and also the PPP, which is mostly a pass-through to employees (though we don’t have the details of this iteration). In other words you have two programs to compensate employees and nothing to keep the businesses alive, as well as a PPP system that kind of induces people to come to work when everyone should be staying home.

Some have endorsed the RESTAURANTS Act, which grants restaurants and bars money with no payroll guarantee, on the idea that unemployment will pick up the slack for workers and this sliver of businesses would stay afloat. I’ve outlined above issues with the unemployment system, and of course you’re only talking about one set of businesses (albeit an important one given the spread of the virus); surely others would come calling too.

The bigger issue, of course, is the political one. This deal has been pushed out with one week left in the lame duck session (hey thanks for getting right on that bipartisan gang!). Mitch McConnell has been promising a deal for months without ever talking to the other side. He only cares about giving immunity to businesses for a “flood” of lawsuits that have not at all materialized, and his liability shield lasts five years. And he’s more concerned with giving Joe Biden a bad start than helping those in need. It goes without saying that there’s no White House interest in this, as it wouldn’t overturn the election results.

So that’s just reality. It was reality in March when the one main deal was struck, the one that was too time-limited to stretch the relief. It’s reality now. I don’t want to be right that there was only one bite at the stimulus apple in this Congress. But here we are.

Days Without a Bailout Oversight Chair


Today I Learned

  • I was on KPFA in the Bay Area yesterday talking about COVID and inequality. Listen here. (KPFA)
  • Amazing title on this report on pandemic harassment in the restaurant industry: “Take off your mask so I know how much to tip you.” (OneFairWage)
  • Harrowing story about an outbreak at an assisted living facility and the hiding of the dead. (The New Republic)
  • Ashish Jha explains that the bar for hospital admission is getting higher, just as you’d expect with a surplus of patients. That will lead to needless deaths. (Twitter)
  • The obese are likely to get priority for the vaccine given their increased susceptibility to the disease. (Washington Post)
  • Herd immunity enthusiast Scott Atlas is no longer a White House coronavirus advisor. (CNBC)
  • Death threats for health officials instituting COVID restrictions. (The Intercept)

David Dayen

David Dayen is the author of Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud, winner of the Studs and Ida Terkel Prize. Follow him on Twitter: @ddayen.