The Incidence and Cost of Wrongfully Denied Unemployment Benefits

Authors

Stephen A. Woodbury, Michigan State University and W.E. Upjohn Institute for Employment ResearchFollow
Wayne Vroman, Urban Institute

Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-4474-2415

Issue Date

June 2001

Abstract

Since 1987, the U.S. Department of Labor has performed random audits of Unemployment Insurance (UI) payments in order to estimate the extent of benefit payment errors—particularly overpayments. However, the accuracy of the process that determines benefit eligibility is not currently assessed. In particular, the extent to which eligible claimants for UI are wrongfully denied benefits is not known. This paper reports the results of the Denied Claims Accuracy (DCA) Pilot Project, a five-state pilot conducted by the Department of Labor during 1997–98, in which random samples of monetary, separation, and nonseparation denials were subjected to intensive field investigation in order to determine their accuracy. Two main sets of findings are reported. The first pertains to the incidence of wrongful denials: After adjusting for appeals, redeterminations, and other agency actions to resolve errors, 11 percent of monetary denials, over 6 percent of the separation denials, and 13 percent of nonseparation denials were in error. Several aspects of these basic findings are discussed: the effectiveness of UI agency activities and the appeals process in correcting errors, the causes of wrongful denials, and the extent to which wrongful denials are correlated with observable claimant characteristics. The second set of findings pertains to the dollar value of benefits lost by claimants due to wrongful denials. Lost benefits are unobservable and must be imputed; two approaches to making the imputations are developed. The imputations suggest that between $565 million and $625 million in benefits were wrongfully denied in the United States during fiscal year 1998, amounting to just over 3 percent of total regular UI benefit payments. Of this total, between $220 million and $240 million were wrongfully denied due to incorrect monetary determinations, between $190million and $230 million were wrongfully denied due to incorrect separation determinations, and between $150 and $155 million were wrongfully denied due to incorrect nonseparation determinations.

Sponsorship

Supported by the Division of Performance Review, Office of Workforce Security, U.S. Dept. of Labor; Contract No. M-5538-5-00-97-30

Subject Areas

UNEMPLOYMENT, DISABILITY, and INCOME SUPPORT PROGRAMS; Unemployment insurance; Benefits and duration