Disability Fraud Holds Down U.S. Unemployment Rate ($200 billion fraud a year at taxpayer's expense)
The Market Oracle ^ | 2/20/2012 | Mike Shedlock
Posted on February 21, 2012 6:41:44 AM EST by tobyhill
Looking for another reason for an artificially low unemployment rate?
Consider disability fraud, people claiming disabilities they do not have such as mental illness. Prior to the great recession 33% of applicants claimed mental illness. The number is 43% now.
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Disability Math
If one million of those disability claims are fraudulent, the civilian labor force would rise to 155,395,000 and the number of unemployed would rise to 13,758,000. The resultant unemployment rate would be reported as 8.9%, not 8.3%.
However, we need to go back further because there were certainly fraudulent claims prior to the recession. For the sake of argument, let's assume 25% of the total is fraudulent.
Unemployment Rate with 25% Fraud
25% of 27.5 million is 6,875,000. The civilian labor force would rise to 161,270,000 from 154,395,000 The number of unemployed would rise to 19,633,000 from 12,758,000 The resultant unemployment rate would be 19633/161270 = 12.2%
Don't like that number? Let's assume a minimum of 10% fraud.
Unemployment Rate with 10% Fraud
10% of 27.5 million is 2,750,000. The civilian labor force would rise to 157,145,000 from 154,395,000 The number of unemployed would rise to 15,508,000 from 12,758,000 The resultant unemployment rate would be 15508/157145 = 9.9%
Is there anyone who thinks disability fraud is less than 10%? If not, then the unemployment rate would be at least 9.9% assuming those in fraudulent claims started looking for work.
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