'The Economic Cost of Social Security Fraud'

A Question of Measurement and Definition

Published in: Bulletin Luxembourgeois des Questions Sociales, v. 30, Mar. 2014, p. 47-62

Posted on RAND.org on March 01, 2014

by Christian Van Stolk, Helen Elmerstig

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The economic cost of fraud and error to the social security system can be considerable. For certain benefit types in OECD countries, between 5-10 percent of social security expenditure can be wrongly allocated to claimants. Benefit expenditure is also considerable, often between 20 and 30 per cent of overall government spending for many OECD countries. Given the current fiscal climate, fraud is at the forefront of policy agendas in many countries. However, establishing the exact level of fraud is not easy. Fraud and error are often confused in definitions. Few countries measure fraud systematically. Governments that do measure, such as the United Kingdom, find that error on behalf of the benefit system can be a more substantial problem than fraud. This finding, which should inform policymaking, questions many governments' obsession with social security fraud. The complexity of the benefit system appears to drive both fraud and error. As such, a government serious about reducing the economic cost of fraud and error really needs to simplify the complexity of the benefit system for both users and administrators.

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