The wages of unemployment fraud: $3.3 billion

Bogus claims are costing the government dearly. In 2011, the biggest chunk went to people who continued to work.

By Aimee Picchi Apr 29, 2013 11:40AM

People filling out paperwork in an unemployment office (© Diverse Images/UIG/Getty Images)The wages of fraud have been calculated, and the figure is a whopper: The government overpaid $3.3 billion in unemployment insurance benefits in 2011 because of bogus claims. 


Most of that fraud -- $2.2 billion of it -- was linked to people who concealed that they continued to work, according to the Federal Reserve Bank of St. Louis.


The findings raise questions about the program's efficacy, at a time when many workers continue to struggle in a still-recovering job market. Although the fraud represents a small percentage of the total $108 billion in unemployment benefits paid out in 2011, it nevertheless undermines the program's goals and perhaps takes away from those who are qualified for the payments.


About $500 million of fraudulently claimed money went to workers earning at least $900 per week, or $46,800 per year, the St. Louis Fed noted. Fraudulent claims for those earning less than $300 per week cost the program a far smaller amount, about $210 million. 


The reason for the disparity is simply that high earners receive bigger unemployment checks, because workers receive benefits that represent a portion of their earnings, the study said.


Despite that, more low-earners committed fraud, according to the bank. Almost half of the concealed-earnings fraud (unemployment claims from people still receiving wages) was committed among people earning $300 to $600 per week. That's annual income of $15,600 to $31,200. 


With the recession and a tough job market, unemployment fraud has come under scrutiny, although the St. Louis Fed didn't note whether the cheating is on the rise or has diminished. But The Wall Street Journal notes that the cost of the fraud likely declined in 2012, given that total spending on jobless benefits fell to $84 billion last year.


Several high-profile cases of alleged fraud have recently come to light. In January, federal prosecutors alleged a fictitious employer scheme defrauded the government of $5 million, with fake employers laying off fictitious employees, who then filed for benefits.


And the Illinois Department of Employment Security last Monday said it was cracking down on unemployment fraud. It alleges that five Chicago-area residents claimed unemployment benefits, even though they were still working, costing the program $159,000.


The program has also come under fire for providing benefits to millionaires, with the government spending $29.9 million in jobless payments to million-dollar earners in 2010, as I wrote earlier this month for MSN moneyNOW. That represented a 44% jump from the previous year. With Wall Street companies such as JPMorgan Chase (JPM) cutting thousands of jobs during the past few years, it raises the possibility that some of those million-dollar earners are bankers or brokers. 


While several bills have been introduced that would limit jobless benefits for workers with high incomes, the proposals haven't gone anywhere. 


Follow Aimee Picchi on Twitter at @aimeepicchi.


More on moneyNOW

77Comments
Apr 29, 2013 12:33PM
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There is little doubt that every government program that has been established to help the needy is rampant with fraud by those who want to get something for nothing.  There is fraud in unemployment benefits, food stamps, government section 8 housing, the earned income credit, the child tax credit, the education credit, and on and on.  From someone that does not enjoy any of these programs but has to pay for all of them by way on income taxes, I have to question why we need any government programs.  They are all abused by the thiefs, the lazy, and the wise guys that want something for nothing.   

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If you know that the fraud is 3.3 Billion, why has it not been stopped before it even reached 1 Billion?or 500 million? If you know there is fraud, you know who got the money! Get it back! Dang......
Apr 29, 2013 12:54PM
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Honestly, I feel like a sucker for going to work everyday and paying my bills and taxes on time.  It feels like I'm the only one left who isn't gaming the system for some type of handout or free benefit.
Apr 29, 2013 12:17PM
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Is anyone shocked?  I know the fraud on Obama's housing bailout was also in the billions...wonder how the fraud is on Obama food stamps?  Many of the poor use Obama's socialist programs to scam him like a 7 year old - why isn't he going after these criminals? 
Apr 29, 2013 12:21PM
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Obama won't go after them because these are his liberal votes...instead he'll extend their fraudulent claims for another year - his friends seem to be unable to work but they sure can vote!
Apr 29, 2013 12:38PM
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The democrats (the give-away party) has killed patriotism by taking our money and blowing it on B.S. like this.  Do stories like this make you proud to be an American?  Do stories like this make you feel proud and obliged to pay your taxes due?  Do stories like this make you think - it is not what your country can do for you, but what you can do for your country?  Hell no!
Apr 29, 2013 12:34PM
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Boy, do we need a good dose of austerity.
Apr 29, 2013 1:43PM
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JUST FOR THE RECORD:

 

Just because you might qualify for disability doesn't mean you'll get benefits for it. You MUST meet TWO CRITERIA IN ORDER TO RECEIVE BENEFITS:

1 - You must have a disability diagnosed by a doctor

          AND

2- It MUST impact your ability to obtain work. You have to meet both !!!

 

And here in Florida, the DEADBEATS (yea-I said it too) work 'under the table' for anyone that will pay them cash & they still rip off the government for benefits they don't need or deserve. They indeed can work and mooch off the system and as we find them, we'll throw them in jail.

Apr 29, 2013 1:07PM
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How much fraud $ went to Iraq and Afghanistan? It's never ending.
Apr 29, 2013 12:42PM
Apr 29, 2013 1:10PM
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this number added to the 5 billion a year in fraudulent claims the IRS pays out to jailhouse scam artists equals?
Apr 29, 2013 1:35PM
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This has been going on for years.  A person gets laid off from a job that pays lets say, $600.00 per week, and receives around $200.00 from unemployment.  That person will work under the table at a usually lower wage to make-up the difference until they get called back to work or find another job.

The more interesting fact is that when benefits run out, most people are able to find work within 15 days.

Apr 29, 2013 1:35PM
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WHAT ELSE IS NEW?  The unemployment and welfare program nationwide have been the target of grifters for years.  The problem is that now that we are hurting for $$$ it is being recognized as a REAL problem, regardless of the fact that it has been a problem for years. 

 

However, administrators of the programs have been totally gunshy of pursuing TRUE fraudulant cases in lieu of offending or affecting the true need recipients!!!   That is how the scalppers got away with it.

Apr 29, 2013 1:30PM
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It might be quicker and easier to list what is not a fraud under Obama..........nothing.
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Well, in light of the article I do believe that all reparations have been paid back to all the blacks, and others out there.

 

So I don't ever want to hear crap about "you owe me" blah blah blah.

 

PAID IN FULL.  Nuff said.

Apr 29, 2013 4:52PM
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I guess it's easy to go after some poor schmuck ripping off the government for a few hundred dollars per week. The big boys that rip off tens of millions get a free ride. What a great country this is!!!
Apr 29, 2013 2:32PM
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Since unemployment is an insurance program, with premiums paid for by the employer (and indirectly by the worker) it's irrelevant how much someone earns. Those paid millions per year have as much right to collect UI as do those earning a fraction of that amount. Insurance programs should never be means tested, whether it's UI, SSI, Medicare, or any other government run insurance program. Those who are proposing means testing are just trying to deny benefits to those who earned and paid for the benefits. In plain language, it's theft!!!
Apr 29, 2013 3:24PM
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This has been going on for to long. Fraud all over in our systems. They have a count of CAUGHT fraud and who knows how much gets through. We are a country that used to pride itself on technology and we can't clean up this mess? How can you get a valid budget when you do not have valid numbers?
Apr 29, 2013 4:04PM
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Not to mention the fraud, probably 5X the dollars in Welfare Fraud too.... There needs to be stops in place. Why can't we pay for a task force to check these claims. I can't believe it would cost more than what we are giving to those that should not be receiving....
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