Product Code Database
Welfare fraud is the act of illegally using state welfare systems by knowingly withholding or giving information to obtain more funds than would otherwise be allocated.
This article deals with welfare fraud in various countries of the world, and includes many social benefit programs such as food assistance, housing, unemployment benefits, Social Security, disability, and medical. Each country's problems and programs are varied. Obtaining reliable evidence of welfare fraud is notoriously difficult.Mathieu Lefebvre, Pierre Pestieau, Arno Riedl, Marie Claire Villeval: Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands CESifo Working Paper 3408, April 2011. Apart from the obvious methodological problems, research reveals that interviewing performance is often mediocre, and may be anecdotal, misunderstood, or collected from opinionated or biased caseworkers.(Dave Walsh and Ray Bull: Benefit Fraud Investigative Interviewing: A Self-Report Study of Investigation Professionals' Beliefs Concerning Practice Journal of Investigative Psychology and Offender Profiling, vol. 8 issue 2, June 2011.) Interviews with non-citizen welfare recipients, where the interviewer has succeeded in gaining a high level of trust, have shown that a very high percent fail to report incomes.Shiri Regev-Messalem: (2013), Claiming Citizenship: The Political Dimension of Welfare Fraud. Law and Social Inquiry, vol. 38 Issue 4 (Fall 2013).Kaaryn S. Gustafson: Cheating Welfare: Public Assistance and the Criminalization of Poverty p. 160. NYU Press, 2012. Official figures of the prevalence of welfare fraud based on government investigation tend to be low – a few percent of the total amount of welfare spending. Statistical research indicates that the vast majority of fraud is committed by businesses serving the recipients of government benefits. Welfare or benefits fraud committed by recipients is usually of very modest sums, and is committed by people who struggle with poverty; but once started it often continues after reaching financial stability.Martin James Tunley: Need, greed or opportunity? An examination of who commits benefit fraud and why they do it Security Journal vol. 24 issue 4 (November 2010).B. Kazemier, R. Van Eck, C.C. Koopmans: "Economische aspekten van belasting – en premie ontduiking en misbruik van sociale uitkeringen." In D.J. Hessing & H.P.A.M. Arendonk (Eds.): Sociale-Zekerheidsfraude: Juridische, ekonomische en psychologische aspecten van fraud in het sociale-zekerheidsstelsel, pp. 123-90. Dewenter 1990, Kluwer. Cited in D.J. Hessing, H. Elffers, H.S.J. Robben, P. Webley: Needy or greedy? The social psychology of individuals who fraudulently claim unemployment benefits Journal of Applied Social Psychology vol. 23, issue 3 (1993).
The German government has estimated that the amounts lost through welfare fraud were 6% of the amounts lost through tax avoidance and subvention fraud.Siegfried Lamnek, Gaby Olbrich, Wolfgang J. Schäfer: Tatort Sozialstaat. Schwarzarbeit, Leistungsmissbrauch, Steuerhinterziehung und ihre (Hinter)Gründe, p. 69. Opladen 2000. Cited here.
German authorities assume that welfare fraud by relatively well-off people of Turkish origin is common, although there is no statistics concerning its scope. It is easy to register as indigent in Germany, although one may have financial assets in Turkey.Boris Kálnoky: Wie reiche Türken den deutschen Staat ausnehmen Die Welt, May 21, 2012. In Braunschweig asylum seekers were able to defraud the government of £3 to £5 million euros in some 300 cases by creating multiple identities.Kate Brady: Braunschweig, northern Germany, uncovers 300 cases of welfare fraud by asylum seekers Deutsche Welle, January 01, 2017.
A criminal network engaging in welfare fraud was revealed in 2016. It is suspected to have been led by a parliamentarian who provided Bulgarians and Romanians with false work contracts and collected millions of Euros.Philine Lietzmann: Millionenschaden durch falsche Aufstocker: Welche Strafe droht den Hartz-IV-Betrügern? Focus Online, September 12, 2016.
A Channel 10 report contended that thousands of Haredi Judaism who nominally study Torah full-time are in essence working illegally. When their reporter Dov Gilhar advertised in Bnei Brak for workers for a fictitious company, it turned out that most applicants intended to exploit the benefits they receive as yeshiva students, although they would work. Nine out of ten "candidates" who were filmed by the hidden cameras exhibited extensive knowledge of defrauding the system. Exposed: Haredim registered in yeshivas, working on the sly Ynet, July 25, 2012. Channel 10: 1,000s of Chareidim Working Illegally Yeshiva World, July 26, 2012. Several haredi yeshivas have been engaging in fraud by enrolling fictitious students in order to receive the living stipends for full-time Torah students. Hundreds of fake students were reported, and millions of shekels received.Yair Altman: Police: Haredi ID fraud spanned years Ynet, November 22, 2010. 5 nabbed for alleged involvement in yeshiva fraud Jerusalem Post August 31, 2014.Yonah Jeremy Bob: NIS 52 million fraud case against haredi NGOs for false claims, forgery Jerusalem Post, November 27, 2016. A report from the Education Ministry and the accountant general of the Finance Ministry concluded that the number of 120,000 yeshiva students claimed by the haredi schools was exaggerated by five to ten thousand.Yuval Elizur, Lawrence Malkin: The War Within: Israel's Ultra-Orthodox The Overlook Press, 2014.
Linked processing of the data for housing allowances and for sickness insurance has taken place in Sweden since 1979. This has created, in the words of Eckart Kuhlborn, "a crime prevention eldorado" by making it possible to identify households which have reported different incomes. A check of 70% of the households that received both kinds of payments showed that 2.7% had given false information about their incomes. The next year, the figure had decreased to 1.2%, possibly due to more widespread understanding of the risk of being caught.Eckart Kuhlhorn: Housing Allowances in a Welfare Society: Reducing the Temptation to Cheat In R.V. Clarke (ed.), Situational Crime Prevention: Successful Case Studies. 2nd ed. Guilderland, N.Y., 1997. Harrow and Heston.
to Statistics Sweden, 40,000 foreigners are registered in Sweden but no longer live there. They can continue to receive benefits, although they live abroad. When the authorities in Tensta decided that benefit recipients have to turn up at the welfare office in order to receive their money, one third did not turn up.Åke Wedin and Eskil Block: Flyktingpolitik i analys, Torsby 1993, Cruz del Sur. Quoted here .
A UK State of the Nation report published in 2010 estimated the total benefit fraud in the United Kingdom in 2009–10 to be approximately £1 billion. Figures quoted as distinct from costs related to error. Figures from the Department for Work and Pensions show that benefit fraud is thought to have cost taxpayers £1.2 billion during 2012–13, up 9% from the year before. A poll conducted by the Trades Union Congress in 2012 found that perceptions among the British public were that benefit fraud was high. On average, people thought that 27% of the British welfare budget was claimed fraudulently, but official UK government figures have stated that the proportion of fraud stood at 0.7% of the total welfare budget in 2011–12. In 2006–07, DWP estimated that it spent £154 million on fraud investigation, yet only recovered £22 million.
Criminologist Martin James Tunley argues that disability benefits are easier to illegally obtain than other benefits, and may be targeted by systematic fraudsters motivated by greed. Although the Benefit Integrity Project concluded that disability benefit fraud was "minimal," the 1997 disability benefits review found that 12.2% of claims were fraudulent.
In the first half of the fiscal year 2012, the office of the Inspector General of the Social Security Administration was able to detect frauds that cost the government over $253 million. Spring 2012 Semiannual Report to Congress Office of the Inspector General, Social Security Administration.
Investigation and prosecution of fraud was intensified in Britain in the late 1970s. A peak was reached in 1980–81, when 20,105 people were prosecuted for welfare fraud. The Rayner commission recommended a more cost-effective approach involving non-prosecution interviews. Special Claims Control Units conducted "blitzes" in target areas and persuaded claimants to withdraw their claims, thereby avoiding expensive prosecutions. In the 1990s, advertising campaigns and "Shop a Cheat" hotlines were introduced.Dee Cook: Criminal and Social Justice Pine Forge Press, 2006. The campaigns led to increases in tip-offs and successful prosecutions, but there is no evidence of a lasting impact on benefit fraud loss.
M.D.R. Evans and Jonathan Kelley: Religion, Morality and Public Policy in International Perspective, 1984-2002 p. 254. Federation Press, 2004.
Data from the World Value Survey indicates that the acceptance of illegal benefit claims has increased in most industrial countries. This shift has been most marked in Sweden, where the share of respondents answering that claiming government benefits to which one is not entitled is always wrong has dropped from 81.5% to 55.3% from the early 1980s to the early 2000s. The data from 2005 to 2008, however, showed an increase to 61.0%. Attitudes vary greatly according to age, with younger people being much more inclined to accept welfare fraud.Nima Sanandaji: The surprising ingredients of Swedish success – free-markets and social cohesion IEA Discussion Paper No. 41, August 2012.
Welfare fraud often reflects an idea that people have a moral right to proper financial support from the government. An Israeli study showed that 47 of 49 women on welfare openly and actively justified acts of welfare fraud, including eight persons who did not admit to committing fraud themselves. They based their claim on recipient's social contribution through motherhood, their past and present efforts to participate in the paid labor market, or their past military service. By contrast, an American study showed great assent to the rules of the welfare system by welfare recipients, even as they found it impossible to comply with the rules.Kaaryn S. Gustafson: Cheating Welfare: Public Assistance and the Criminalization of Poverty pp. 170f., 183. NYU Press, 2012.
/ref> persons who are not the beneficiary; or recipients who live under precarious circumstances and feel that they do not have much of a choice. Some belong to the new underclass – marked by low social status, limited education and inadequate qualifications – and do not easily find employment and are receptive to opportunities offered by their social network, which may include the "informal economy." The inflexibility of the system makes reporting short works unprofitable or inconvenient, which undermines some welfare recipient's belief in the legitimacy of the system.Kaaryn S. Gustafson: Cheating Welfare: Public Assistance and the Criminalization of Poverty pp. 169f. Cf. p. 183. NYU Press, 2012. Many fraudsters find the type of jobs available to them incompatible with their responsibilities as caretakers. There are also studies which indicate that a majority of fraudsters are not motivated primarily by severe economic problems.Piet H Renooy: The Informal Economy: Meaning, Measurement and Social Significance. Amsterdam 1990, Koninklijk Nederlands Aardrijkskundig Genootschap. Cited in D.J. Hessing, H. Elffers, H.S.J. Robben, P. Webley: Needy or greedy? The social psychology of individuals who fraudulently claim unemployment benefits Journal of Applied Social Psychology vol. 23, issue 3 (1993).D.J. Hessing, H. Elffers, H.S.J. Robben, P. Webley: Needy or greedy? The social psychology of individuals who fraudulently claim unemployment benefits Journal of Applied Social Psychology vol. 23, issue 3 (1993). Data from the World Values Surveys show that higher rates of unemployment tend to lead to lower levels of benefit morale in the population, as more people are familiar with the situation of being a benefit recipient and know the cost of dispensing with it.Friedrich Heinemann: Is the Welfare State Self-destructive? A Study of Government Benefit Morale ZEW Discussion Paper No. 07-029, Mannheim, 2007.
| 1981–84 | 81.5 |
| 1989–93 | 74.5 |
| 1994–99 | 57.9 |
| 1999–04 | 55.3 |
| 2005–08 | 61 |
| Percentage agreeing that "claiming government benefits to which you are not entitled is never justified". | |
There is also a clear correlation between increased social spending and deteriorating benefit morale, a phenomenon predicted by economist Assar Lindbeck. The size of the welfare state does not correlate with low benefit morale, since a high benefit morale is a precondition for viable welfare states; it is the growth of the welfare state that predicts deteriorating benefit morale. The Swedish example illustrates this with declining benefit morale accompanying the development of a generous welfare state, and a break in the trend following the roll-back of the state since the 1990s. Detrimental effects of the welfare state are consistent with the large cohort differences in benefit morale.
Differential association and social disorganisation leads to subgroups holding deviant value systems, which may include tolerance of, and even expectations of, welfare fraud. Although there is evidence for a prevalent fraud culture influencing social cohesion in some neighborhoods, this is a politically sensitive issue. The Department for Work and Pensions in the UK has a policy of refraining from routinely identifying cultural clusters where welfare fraud is likely to be most prevalent.
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