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Unemployment Fraud is Getting Expensive

The government paid out $108 billion in unemployment benefits in 2011. And $3.3 billion of that money should not have been spent, according to a new study out of the St. Louis Fed.

That $108 billion went to the 3.7 million people who collected jobless benefits…interestingly that amounts to only 27% of unemployed individuals.

So, not everyone who is unemployed collects benefits. And not everyone who collects benefits is unemployed. Payouts to people who were actually working and earning wages in 2011 amounted to $2.2 billion – the largest source of fraud in the unemployment system.

Other forms of fraud include prisoners behind bars collecting benefits, and benefits paid out to people who are no longer living but haven’t been purged from the unemployment rolls. With limited resources to prevent fraud or to recover improper payouts, the government has to make a trade-off between money lost and the number of people on benefits.

For whatever its worth, last year in another study the St. Louis Fed reported that over the past 22 years, an average of just 35% of those unemployed have collected jobless benefits. The study concluded that the amount of unclaimed benefits outweighs the amount of fraudulent payments.

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