(Latest in a series since March on the pandemic’s employment impacts, and rebuilding America’s job base. The previous ones are here.)

For the past two months the media in California have been running daily variations of the theme “Why Can’t I Get My Darn Unemployment Check”. Unemployed Californians tell reporters about waiting 10 weeks or more from the time of application for UI payments. They tell about spending four hours or more a day trying to call into the UI call centers, and unable to get a live operator. They tell about receiving one or two checks, and then all of a sudden, nothing. They rile against the incompetent state Employment Development Department (EDD). 

Claimants have every reason to be angry, very angry. But the delays are not to do an incompetent EDD or indifferent state workers or any of the other frequent targets. The causes lie elsewhere.

EDD is a large (nearly 10,000 employees) Weberian bureaucracy, with the strengths and limitations of such a bureaucracy. It has detailed written protocols on how to handle UI claims, just as it has detailed protocols for tax administration and disability insurance administration. It has a structured hierarchy, with layers of supervision and review. The current director has been with the department for over 25 years, is a serious professional not some political appointment. Overall, the department has a high level of professionalism, and sense of mission.

The UI program itself is a rule bound system. One can imagine an UI system in which anyone who is unemployed can apply and receive UI. That’s not the current system. EDD claims administrators are required to verify, among other items, identity and legal right to work, wage records, certain income received, and on-going certifications. Discrepancies in any of these items will slow down processing of an individual claim.

Further, the UI system since June has had to contend with a rapidly growing number of fraudulent claims, and the emergence of sophisticated fraud rings, some from overseas. Fraud especially has hit the Pandemic Unemployment Assistance (PUA) program that provides benefits to independent contractors. PUA claims in California soared to over 200,000 weekly in August and September (reaching over 400,000 during one week), and it now appears that most of these were fraudulent. The Colorado UI system recently reported that over 75% of PUA claims it reviewed from August were fraudulent; the Arizona UI system has flagged more than 80% of its PUA claims as possibly fraudulent. A recent video by rappers Nuke Bizzle and Fat Wizza (entitled “EDD”) parodies how easy it is to get UI debit cards—the initial video received nearly one million views before it was taken down last week. Anti-fraud efforts have led California and other states to temporarily freeze accounts and take other identity verification measures that have slowed processing.

The UI system rules and anti-fraud efforts account for a part of the delays, but the main part is connected to the tremendous increase in the number of claims. In January and February, the state was averaging around 42,000 new UI claims a week. Beginning in March, the weekly claims jumped to as high as one million for the last week in March, and registered continually above 250,000 per week for the next four months. As recently as late September, when the state put a hold on accepting new claims, claims were above 200,000 per week. 

This increase in claims, in turn, is rooted in the strict economic lockdowns, imposed by County Health officials in March, and then re-imposed in July. The Bay Area press have been effusive in their praise of the County Health officials (“She’s a rock star”, a KGO-radio host gushed about the Santa Clara chief health officer, Dr. Sara Cody). Not ever mentioned has been how the choices made by these health officials are impacting employment, including the spikes in unemployment claims (Santa Clara has seen among the highest increases in unemployment claims). 

Even if one believes that the lockdowns were correct, that they were necessary and continue to be necessary, that the health system would be overwhelmed otherwise, it’s important to acknowledge the economic tradeoffs. In public policy, all ends are not compatible. Public health measures do not operate in a vacuum; their impacts on employment as well as mental health/social welfare need to be recognized and weighed.

It’s not only the media and county health officials who ignore the tradeoffs. In Sacramento, only Governor Newsom has been direct in recognizing them and trying to strike balances. For the Democrats in the state legislature and Democratic policy groups, it’s all someone else’s fault. “If only EDD was more efficient, if only state workers cared about the unemployed , if only there was a different national administration, if only, if only, if only…”, all oblivious to the main cause and tradeoffs.

In July, Governor appointed a “Strike Force” to evaluate the UI system, headed by Jennifer Pahlka, founder of Code for America, and Yolanda Richardson, Secretary of Government Operations Agency. The report issued by the Strike Force in September, took a detailed and thoughtful look at the system and its history—far more thoughtful than the usual empty government task forces. It suggested, for example, that EDD stop hiring additional claims administrators, since the new hires were not able to significantly contribute, and were taking experienced claims administrators away from their functions. It made several recommendations, the main one of which was the introduction of a new verification system, ID.me. This new verification allows for more rapid uploading of identity documents and reduces the need for manual verification.

The new verification system was introduced earlier this month, and is already beginning to reduce the backlog. Last Thursday, the EDD claims tracker showed the number of backlogged claims (those in the system more than 21 days without processing) down by over 200,000 claims in the past three weeks. But that still left more than 1.1 million backlogged claims, and EDD saying that it expected the backlog to be eliminated only by January 2021. Even this timetable will depend on a more vigorous employment recovery in the next few months.

The pandemic has revealed how much the UI system in California and elsewhere is in need of broader reform after the pandemic: the out-of-date computer networks, the uneven coverage, the distorted incentive structures. For now, the UI system’s emphasis needs to be on expediting payments, while meeting the anti-fraud and system integrity requirements.

But let’s be clear: today, the state UI systems and their employees who administer claims are not the main cause for your unemployment check, or your brother-in-law’s unemployment check, or your neighbor’s unemployment check, being so late. That cause lies elsewhere.


First appeared in Forbes