The (Poor) Performance of the Unemployment Insurance System during COVID-19 in the United States and (Especially) Wisconsin

Noah Williams

Executive Summary:

With the onset of the COVID-19 pandemic, unemployment increased at a rate never before seen in the United States. In response, the federal government expanded unemployment insurance benefits to aid those thrown out of work. However the rapid increase in unemployment claims put incredible strain on the unemployment insurance system, leading to non-payments and delays which limited the program’s effectiveness. While unemployment insurance system performance deteriorated nationwide, Wisconsin was one of the worst performing states across many different metrics.
Although unemployment claims have grown sharply since COVID, a smaller share are now leading to benefits. Payment rates for unemployment claims have fallen from 45% to 20% nationwide, and to 12% recently in Wisconsin. Part of the decline is due to a large increase in applications from workers who do not qualify for benefits. Adjusting for changes in the pool of applicants suggests that recent national claims are much closer to pre-pandemic levels than the reported numbers suggest. Since March 2020, Wisconsin has had one of the lowest payment rates in the country, 5th of the 48 states with accurate data. But its pool of workers has changed less, suggesting that the low payment rates are due more to problems processing claims.
During the pandemic, unemployment benefits payments lagged claims significantly, with some filers going months without hearing on their cases. In Wisconsin nearly 30% of first unemployment payments were delayed more than 70 days, the 8th highest rate among states. Wisconsin’s continued claims also had delayed payments at more than double the national rate. While payments have been slower, they have not been more accurate. Amid growing reports of rampant fraud, the fraud detection rate has dropped to near zero, with detected cases of fraud down 41% even as claims have exploded. Further, although the payment rate in Wisconsin has fallen, overpayments have increased. In the 2nd half of 2020, the state’s overpayment rate was 27%, the 2nd highest rate in the country. For 2021:Q1, Wisconsin overpaid claims by more than $12.8 million.

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