Here’s why there’s a backlog of claims for unemployment and why it’s only getting worse.


Beckie Kern can relax a little.

She’s finally being compensated for unemployment insurance benefits again after her payments suddenly stopped at the end of May.

Her UpLink account, the electronic system where claimants file and submit vouchers for benefits, indicated she had an “availability” issue but provided no other explanation. It took weeks to resolve. 

“That’s only because I finally got an unemployment lawyer,” she said. The pro bono attorney, whom Kern found after an exhaustive web search, contacted the Indiana Department of Workforce Development. And on July 23, Kern, a self-employed clinical massage therapist, was compensated with back pay. She could finally pay creditors and catch up on bills. 

Kern is among the more than 900,000 Indiana workers who’ve filed for unemployment insurance benefits since mid-March when the state’s economy nearly ground to a halt due to the novel coronavirus pandemic. Many claimants have been paid without issue, but for others the process has been a frustrating and confusing experience.

Economists and unemployment insurance experts aren’t surprised. States across the nation have reported that their UI offices have been overwhelmed by the pandemic’s heightened joblessness. Indiana’s unemployment rate spiked to 17.5% in April and has declined since.

A perfect storm of factors

The patchwork of state-run programs did not support the modern gig economy and have been steadily chipped away at for years, even before the pandemic. Experts say a several created issues in Indiana during the pandemic, including:

  • A disproportionately high number of unemployed Indiana workers were not receiving unemployment insurance assistance even before the pandemic.
  • In part because of historically low unemployment, at the start of the public health crisis DWD was staffed to handle fewer workers receiving benefits. Facing rapid and skyrocketing unemployment, the agency scrambled to find new workers. 
  • Under normal circumstances, it can take up to a year for new DWD claims adjudicators to be trained and ready to handle a variety of complex claimant issues. However, that timeline has broken down because of urgent needs during the pandemic.
  • On top of this, the state’s Unemployment Trust Fund was below the recommended solvency level at the beginning of the year, raising concerns that Indiana could end up borrowing from the federal government in the future to cover UI claims. 

Christopher O’Leary, senior economist at the Michigan-based W.E. Upjohn Institute for Employment Research, notes that lagging data shows that Indiana was only paying benefits to about 18% of unemployed people in 2018. 

“The system was not geared up for much capacity, and I would imagine that their claims are more than double — probably in certain weeks three or more times the worst ever,” he said. “So I’m not surprised that there is a backlog. And, I’m not surprised that there are individual cases that need further examination, and it takes a while.”

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Beckie Kern, a massage therapist who counts athletes and professional musicians as clients, eventually got help from a pro bono lawyer, but her struggle to get unemployment benefits is one that other Hoosiers have faced. (Photo: Robert Scheer/IndyStar)

Keeping up with an evolving economy

Initial unemployment claims in Indiana peaked at 139,174 during the week ended March 28. The number of new claims filed weekly has steadily dropped, except for the week ended June 27 when an additional 53,364 were logged. DWD officials attribute the spike to potential fraud that seeped into the system. But for the most part, new claims remain elevated at above 20,000. 

As in other states, the onslaught of new claims stressed Indiana’s unemployment insurance program. To navigate the system, some unemployed workers formed Facebook groups to swap advice and seek answers. Others have posted their complaints about long telephone wait times, dropped calls and difficulty reaching workers at DWD’s call center on the Indiana Department of Workforce Development’s social media pages. 

The agency said about 85% of claims are consistently paid out. It describes the remaining 15% as a-typical cases. Josh Richardson, DWD chief of staff, said the state agency reduced average telephone wait times to about 10 minutes. However, earlier this month that metric started to rise again — reaching about 30 minutes in some cases—as potential fraudulent claims were flagged. 

Still, multiple Hoosiers who have reached out to IndyStar have reported hours-long wait times. Indiana isn’t the only state where the unemployment insurance program had problems during the pandemic. In neighboring Ohio, claimants waited for an average of 48.2 minutes for call center employees to answer their questions in late May, according to published reports. Staff at the Department of Job and Family Service answered fewer than 40% of calls. 

Annelies Goger, a David M. Rubenstein fellow at the Brookings Institution’s Metropolitan Policy Program, said nationally more initial unemployment insurance claims were filed during the past 18 weeks than at the height of the Great Recession. Each claim undergoes an administrative process that requires verification that contributes to a bottleneck in the system.  

The current unemployment insurance program was established as a result of the Great Depression, which left American workers jobless and destitute. The program intends to limit hardships endured by workers who lose jobs through no fault of their own.The program is financed by taxes employers payon employee wages. The monies are kept in state trust funds that are maintained by the U.S. Treasury and are the source of benefit payments to eligible claimants. 

But Goger notes that state-run unemployment insurance programs have not kept up with changes in the evolving, diverse U.S. labor market. Technology has given rise to the gig economy where a new class of workers can make ends meet as independent delivery drivers and on-demand drivers, other freelancers and contracted workers. 

“Since the Great Recession, fewer and fewer people that were unemployed were actually protected under that old system because they kind of eroded all of the qualifying factors,” she said.

Goger said lawmakers realized the economy would start to collapse if a safetynet wasn’t in place for people who would fall through the coverage gap. To catch these workers during the pandemic, Congress created the federal pandemic unemployment assistance program in the coronavirus relief bill approved in March. Like other states, Indiana had to build a new system to administer and disburse the funds. 

The program provides up to 39 weeks of benefit payments for eligible individuals and ends Dec. 31. 

‘The system is not geared up’

States have a wide range of discretion in how they set up their unemployment insurance systems. Weekly maximum benefit amounts vary from state to state. Income restrictions help limit the pool of workers eligible for coverage, Goger said. Those restrictions became tighter after the Great Recession as states sought to recoup monies paid out. 

O’Leary said he’s not surprised that Indiana struggled to keep up with the surge in jobless claims. Based on 2018 data, the latest year available, roughly 18% of Indiana’s unemployed were receiving unemployment insurance benefits, according to the UpJohn Institute. The state ranked 12th from the bottom in terms of the proportion of unemployed who were receiving benefits before the crisis. 

“If you’re paying benefits to 50%, you’re probably hitting most of the people who are involuntarily unemployed…,” he said. “But if only 18% of the people get benefits, then I would say that’s probably not reaching all the people who, you know, really should be getting benefits.”

O’Leary added that Indiana didn’t need as many workers to handle claims pre-pandemic as it needs now. “The system was not geared up to handle a lot of claims and so it’s not surprising that it’s taking people a while,” he said. 

States receive federal funding to administer unemployment insurance programs. Richardson said the prior year claims volume determines how much a state program receives in federal dollars for a year, and that helps determine staff. 

“Coming into 2020 we were facing historically-low claims volumes, historically-low unemployment rates and so the funding we received from the federal was commensurate with that,” he said. “Our staffing was commensurate with those levels.”

When first-time benefit filings surged, DWD knew it would get more federal dollars to pay for staffing, Richardson said. The bigger challenge for the agency was rapidly training new employees.

This all points to another looming issue.

While there’s no federal requirement for the amount of funds stowed in a state’s UI Trust Fund, there is a recommended reserve level for going into recessionary periods. 

“The recommendation to prepare from the U.S. Department of Labor was that the state have at least 1.48% of their payrolls in reserves,” O’Leary said. “The state of Indiana had about three-quarters of that on hand when they went into the crisis so they were slightly under reserved according to the suggestion.”

The state could end up borrowing from the federal government to cover future unemployment insurance compensation. Indiana’s solvency level was 0.51 at the start of the year, according to the Labor Department. The state had a fund balance of $895.3 million at that time. DWD said it has paid out $3.6 billion benefits since the week of March 13.

Indiana’s trust fund currently holds $168.1 million as of July 30, according to the U.S. Treasury. Internal DWD numbers reflect a balance of $156.5 million as of Friday. The agency anticipates the fund will probably stay solvent until sometime in September.

So is Indiana’s unemployment system an effective safety net?

That depends, Goger said. 

“It’s one thing if you’re laid off in a regular economy, and you get a little bit of that wage replacement, but there’s still a pretty robust labor market around you. It’s not too hard to find another job,” she said. 

However, she notes it’s a different ballgame if searching for work could be dangerous or there are mass layoffs around the country. 

“It makes it much harder for people to find new jobs,” Goger added. “They’re probably going to have to live off that income for a longer period.”

Lives on hold 

Four and a half months into the pandemic, some Hoosiers are still sorting issues with their weeks-old unemployment insurance claims.

Susanne Smith of Fort Wayne is one of those people. Smith had two part-time jobs before the pandemic but saw her income cut when one went away. She applied for benefits in late April and was denied under the regular unemployment insurance program.

She then applied for pandemic unemployment assistance and was paid $1,262 for two weeks. But, something unexpected happened.

“The day after I got paid, I got an email that said that I was overpaid, and I needed to pay them back,” Smith told IndyStar. She said she was told to pay back $1,466 — her payment plus taxes. It took two weeks to get a DWD worker on the phone.

That was in May. Smith said she was told her claim had yet to be approved, but she could hang on to the money as she would likely get approval. Smith didn’t trust that advice. She decided not to spend the money, calling every few weeks to check her status. 

“When I call, some people tell me I don’t qualify while others still say I do and to wait patiently. Still, no payments,” she said. “I ended up having to pay them back the two weeks they paid me then said I owed them because they were going to send me to a creditor.”

Smith said she returned the money. She’s still waiting to be approved for benefits. 

Kern hasn’t been able to work during the pandemic. She owns the Indiana Holistic Center on East Washington Street. The business, which caters to musicians, athletes, and others, is temporarily shuttered. She said that’s been stressful.

Kern estimates that she contacted DWD’s call center 30 times, encountering jammed phone lines and long wait times. When she did get through, workers were unable to answer her questions and transferred her calls. She would get disconnected. 

Kern is certain she’s shed tears along the way. 

“There are those moments where you just don’t know which way you’re going to turn,” she said. “You have to hope that somewhere someone is going to come up with an answer.”

Similar to Kern and Smith, Renee Larson of Indianapolis saw her unemployment insurance payments abruptly stop. She was receiving $749 a week until the second week of May. Furloughed from two part-time jobs, Larson continued to file vouchers despite receiving no pay. She called DWD repeatedly, but she was told nothing could be done until a claims investigator contacted her. 

“They said the reason was that I was employed full-time, which I’m not full time. I’m a part-time employee,” she said. Her payments started again in early July after roughly eight weeks of filing vouchers with no pay. 

The experience left her frustrated and angry. 

Lesson and persistent problems

Indiana updated the technology infrastructure of its unemployment insurance system before the pandemic. But, no one predicted the coronavirus recession, DWD’s Richardson said in a statement and telephone interviews with Indystar.

Benefit payments can be held because the state agency received information that causes it to question a claimant’s eligibility, he said. That information could come from employers; the claimant’s answers to questions; the information provided by the employer; a cross-match with some other system; or, in rare instances, from other outside sources.

“If a person files a legitimate claim today, it’s still the most likely scenario that they receive their first payment in less than 21 days. That is still the rule today. It has been the rule the whole way through,” Richardson said. “What happens though, is for people that don’t fall into that “most people” category, their wait has become longer.”

At the beginning of the pandemic, DWD had about 120 in the claims investigators role but increased that number to 450 by early July, Richardson said. Roughly 500 people can write determinations during the week. 

The usual timeline for training a claims adjudicator is 12 weeks, followed by a roughly six-month introductory period. With the pandemic’s heightened unemployment, DWD reduced the training line to expedite the process, and new employees are likely to  focus on certain issues.

“It is not where we can call all of those new employees fungible —  where any issue that can be thrown (at them),” he said. “We’ve also got to make sure that we’re routing issues to people that are capable of resolving them.”

Richardson acknowledges that this can be an issue for some claimants seeking help. As lingering issues are sorted out, there’s a looming possibility that more people may opt to remain in the system as the pandemic endures.

Richardson said DWD is enforcing return-to-work provisions.

“There are processes in place to make sure we can receive an advance from the federal government so we will be able to fund benefits,” he said. “But, we’re also the workforce agency so we know from the Great Recession that the longer an individual’s unemployment spell is the more risk there is to finding gainful employment out of it.”

Goger said she is worried about situations such as Smith,’s where state unemployment agencies ask claimants to return their money because of errors. 

“When states go back and ask for their money back after they made the determination and they made an error, I think that that’s going to create all kinds of problems and scandals,” said Goger, noting that prior to the pandemic Michigan workers falsely accused of unemployment fraud filed a class action lawsuit.

She said a misspelled name could bottleneck the process and take weeks to sort out. 

“We’re gonna see a lot of lawsuits coming out of that,” Goger said. “Nobody with a very low wage can afford and who’s unemployed can can afford to save the money they’re getting to be able to live on. It’s going to be ugly as this progress.”

Contact IndyStar reporter Alexandria Burris at a[email protected] or call 317-617-2690. Follow her on Twitter: @allyburris.

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