NCPA - National Center for Policy Analysis

Paid not to Work

September 30, 2003

The Unemployment Insurance (UI) system erroneously pays billions of dollars to people who do not qualify. These overpayments equaled 9 percent, or $3.7 billion, of the $41 billion paid to laid-off workers in 2002, according to audit results recently issued by the U. S. Department of Labor.

The fundamental problem, says NCPA Senior Fellow William B. Conerly, is that we accept a high level of overpayments as a routine cost of doing business, rather than treating it as excessive waste that must be stopped.

Overpayment of benefits is persistently high:

  • Over the last 15 years, the overpayment rate has ranged from 7.5 percent to 10.1 percent.
  • Last year's overpayments of 9.1 percent were above average and above the previous two years' levels, indicating that we are making no progress in reducing them.
  • In three states, the misdirected funds equaled 20 percent or more of all unemployment benefits paid in 2002.

Every state has an overpayments problem. Even the track record of the three states with the best performance is nothing to be proud of: Vermont, Massachusetts and Oklahoma still overpay more than 1.7 percent of their total benefits.

The states with the worse worst problems are incredibly bad. Virginia, Texas and Louisiana all have overpayment rates in excess of 20 percent -- more than one of every five dollars paid in benefits goes to someone who does not qualify.

Source: William B. Conerly, Ph.D., "Wasting Billions on Unemployment Insurance Overpayments," Brief Analysis No. 458, September 30, 2003, National Center for Policy Analysis.

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