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--- news (10/26/2012)
The Wall Street Journal:

More People Eschew Jobless Benefits Than Scam System

Some people scam the system to get jobless benefits they don’t deserve. But far more don’t claim the benefits for which they are eligible, according to research by economists working with the Federal Reserve Bank of St. Louis.

In 2009, for example, the federal and state governments paid almost $121 billion in unemployment insurance, including $11 billion in overpayments.

If everyone eligible for jobless benefits that year had claimed them, the program would’ve had to shell out an additional $108 billion, according to an article by Concordia University economist David Fuller, St. Louis Fed economist B. Ravikumar and Texas A&M University economics professor Yuzhe Zhang. Their research was posted in the St. Louis Fed’s Regional Economist, a quarterly publication.

“On average, the unclaimed benefits are much larger than the more frequently discussed overpayments,” the authors note.

Overpayments are tracked by the Labor Department‘s Benefit Accuracy Measurement program, which uses investigators to audit random samples of weekly unemployment insurance claims and interview the people receiving them.

The authors calculated the amount of unclaimed benefits by using the Labor Department’s Current Population Survey data to determine the number of unemployed people in each state, as well as each state’s requirements to get jobless benefits. They then multiplied the total number of eligible unemployed people by the average amount of jobless benefits per person.

There are a variety of reasons why people might not claim their benefits, including anxiety over state investigations into how they lost their jobs or changes in the application process that pose hurdles, said Claire McKenna, a policy analyst at the National Employment Law Project. Florida, for example, now requires the unemployed to apply for benefits online and complete a 45-question “individual skills review,” which can intimidate some people, she said.

Critics of the nation’s unemployment insurance program, created in 1935, have often worried about incidents of fraud in the system. Meanwhile, some Republican lawmakers have argued that jobless benefits may undermine unemployed people’s motivation to look for new jobs.

But most of the overpaid benefits didn’t result from acts of fraud, which must be committed deliberately. Sometimes the wrong formula is simply used when crunching the numbers, resulting in someone getting paid too much in benefits. Cases of fraud made up about a quarter of the total overpayments between 2007 and 2011, according to the article.

And overpayments made to unemployed people who didn’t meet the requirements for seeking a new job–by filing a minimum number of job applications each week, for example–now represent less than 5% of fraud. (During this period, the average overpayment was 11% and in cases of fraud was most commonly sent to someone who had returned to work.)

Looking at a longer period, from 1989 to 2011, overpayments made up less than one-tenth of all the jobless benefits paid, and those linked to fraud comprised less than 3% of all benefits. By contrast, unclaimed benefits amounted to nearly seven times the overpayments, according to the research.

That means the program could have been a lot more expensive. Even so, the cost of jobless benefits came under scrutiny at the end of 2011, when Congress struggled to find a way to pay for extended federal jobless benefits and a cut in workers’ payroll taxes.

States typically pay for the first 26 weeks of unemployment benefits, largely through a tax on employers. Some states, often with federal assistance, have been paying for extra weeks to cope with high unemployment. The federal government, which pays to administer the programs, stepped in during the recession to support additional benefits, which at one point were capped at 99 weeks total, but have since been lowered.

Unemployment insurance is available for workers who weren’t at fault for losing their job. Those who quit or who are new to the work force don’t qualify, and benefits are based on a worker’s prior wages. They must reapply weekly or biweekly, depending on the state, and indicate that they are looking for work.

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