Who Is Concealing Earnings and Still Collecting Unemployment Benefits?

Source: David L. Fuller, B. Ravikumar and Yuzhe Zhang, Federal Reserve Bank of St. Louis, Regional Economist, April 2013

The unemployment insurance program in the U.S. offers benefits to workers if they lose their jobs through no fault of their own. In 2011, this program cost $108 billion, of which nearly $3.3 billion was spent on overpayments due to fraud.1

Unemployment insurance fraud occurs when an ineligible individual collects benefits after intentionally misreporting his or her eligibility. Recent headlines have brought attention to extreme forms of fraud, such as the collection of unemployment benefits by prisoners.2 The dominant form of unemployment insurance fraud, however, is what’s called concealed earnings fraud. This fraud occurs when individuals collect unemployment benefits while they are employed and are earning wages. The overpayments due to concealed earnings accounted for almost $2.2 billion in 2011, two-thirds of the total overpayments due to all categories of fraud.3

In this article, we document a few facts regarding concealed earnings fraud among various income groups. These facts may help focus efforts to deter fraud and to recover overpayments…