The (Unemployment) Check Is In the Mail

The unemployment check is in the mail … or perhaps it’s even not on its way yet.

Bloomberg reported on Tuesday (June 2) that a significant amount of unemployment benefits — roughly a third of them — have yet to be paid out. It seems the deluge of more than 40 million unemployment claims has swamped the government and exposed some inefficiencies of an antiquated system plagued in part by paper checks.

Drilling down into the numbers, the U.S. Treasury disbursed $146 billion in jobless benefits over the three months that ended in May, but the total should have been about $214 billion, according to a Bloomberg analysis. That’s based on the metrics of weekly unemployment filings and the average unemployment claim’s dollar amount.

The resulting $67 billion shortfall is nothing to sneeze at against a backdrop where the unemployment rate could soon hit 20 percent. Every bit of the money from U.S. government pandemic stimulus checks ($1,200 per adult) and a temporary boost in weekly unemployment payments (an extra $600 a week) will help for the jobless.

Unfortunately, several states’ unemployment departments are grappling with older computer systems. And there’s snail mail involved, too. While individuals can typically file claims and check the status of payments online, some requests for new passwords are being sent through — you guessed it — the U.S. mail.

Add it all up and the stage may be set then for more modern ways to get government payments to recipients, chiefly through digital means. For example, some in Congress floated the idea of creating a “digital dollar” in a draft proposal of one early federal stimulus bill.

Lawmakers seemed poised to consider using digital dollars as a way to get aid money to Americans in a streamlined fashion. In concept, the Federal Reserve could use newly created digital wallets and digital dollars to get payments directly to individuals and families.

In technical terms, as noted in this space previously, the digital dollar would be “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).”

If proposals such as that move forward, it’s conceivable that there might be some public/private partnerships involved. For example, payments giant Visa recently filed an application with the U.S. Patent and Trademark Office that would create a digital currency (underpinned by blockchain).

The urgency of getting economic aid to those who need it, in haste, is underscored by recent PYMNTS research that shows how many Americans live paycheck to paycheck and lack a savings buffer. Our recent COVID-19 Pandemic: How the Paycheck to Paycheck Economy Is Beginning to Buckle study found that six of ten consumers surveyed are living paycheck to paycheck, while roughly half have less than $2,500 in savings.

Beyond the high tech means of getting funds to recipients, the limitations of the status quo have been laid bare. As Drew Edwards, CEO of Ingo Money told PYMNTS last month: “As the U.S. government continues to distribute economic impact payments to American citizens via ACH and paper checks over the course of weeks and months, it has become increasingly clear that their legacy payment infrastructure is ripe for innovation.”

He noted further that the government “is not a payments company and was not set up to [instantly] distribute a large chunk of $2 trillion to hundreds of millions of consumers and SMBs.”