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Unemployment Benefits: Why Some People Don't Collect Even Though They're Eligible

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AP
AP

Matthew Egerton applied for unemployment insurance as soon as he lost his health care administration job at the very end of 2010.

The Virginia Employment Commission approved Egerton's benefits, but Egerton balked when he learned that unemployment claimants in Virginia are required to give the government names and phone numbers of their job search contacts.

"I did not want to do this as I did not want the negative impression of the VEC checking with employers while they were considering my application," Egerton, 35, told The Huffington Post in an email. "I did not want the risk of seeming like a bad candidate and hurting my chances of being accepted."

Congress is currently deciding whether to keep federal unemployment insurance for the long-term jobless next year, which would cost $30 billion. Democrats want to keep the benefits, while Republicans haven't given an official stance. But concern that unemployment insurance is wasted on people not even trying to find jobs often colors the debate among rank-and-file Republicans on Capitol Hill.

"It's easier for them to stay on unemployment than it is to work," Sen. Orrin Hatch (R-Utah) said recently, adding that he suspected some people game the system to collect benefits for which they're not eligible.

But while stories of waste and fraud in the unemployment system often dominate headlines, fewer people are gaming the system than avoiding it altogether, according to a recent study for the Federal Reserve Bank of St. Louis. On average, the study found, savings from unpaid benefits are seven times larger than the cost of improper payments over the past 22 years.

The Labor Department paid $13.7 billion worth of improper benefits in fiscal year 2011, the Government Accountability Office reported this year. The National Employment Law Project, a worker advocacy group, says federal data show actual fraud accounts for less than 30 percent of improper payments. The most common type of fraud involves continuing to collect benefits after returning to work.

David L. Fuller, professor of economics at Concordia University and a co-author of the report for the St. Louis Fed, said it's difficult to know why people laid off through no fault of their own might not collect benefits for which they're eligible.

"The most natural reason that people tend to come up with is that if you expect your unemployment duration to be relatively short, you may not claim," Fuller said. In other words, people figure they won't need the money, so they don't want to put up with the hassle of filling out forms.

But some people might have less practical reasons for not collecting benefits. Jen Bennett of Cottonwood Heights, Utah, lost her job as an event planner in August 2010 and said she just didn't want to rely on unemployment compensation. (Bennett and Egerton both contacted HuffPost in response to an earlier story that solicited reader input on this topic.)

"I feel that I have more of an independent spirit," Bennett, 48, said. "I don't want to rely on anyone. I don't want to rely on the government. I don't want to rely on those benefits."

What followed in Bennett's case is probably unusual: Rather than search for a new job similar to the one she lost, Bennett, 48, said she sold her house and rented a farm. Now she grows her own food.

She said she resented Orrin Hatch's comment and admired J.K. Rowling, the Harry Potter author who remained a British citizen despite high taxes, partly out of gratitude for a government safety net that had helped her survive.

"That's the attitude people really should have, and not this attitude that people on welfare or taking food stamps are happy for the free ticket," Bennett said.

As for Egerton, he wound up unemployed for an entire year before finding a health care administration job in Baltimore similar to the one he'd lost in Virginia. If he had spent that time collecting benefits, which he said would have been roughly $200 per week, Virginia's unemployment trust fund would have nearly $10,000 less in reserve.

"If I hadn't found a job after too much longer," he said, "I probably would have started applying for it."

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