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In the United States, there is a strong moral trope that “cheating the system” is common among welfare recipients, despite evidence that welfare fraud is fairly rare (USDA 2018). Using a combination of interviews and ethnographic fieldwork conducted in seven high-poverty, rural communities in Central Appalachia, I consider how this national trope impacts local communities. I find that residents from a broad stretch of economic backgrounds make frequent assertions of the presence of welfare fraud in their communities, even without concrete evidence to prove it. People evaluate their neighbors’ morality along two dimensions: 1) whether they receive their benefits legitimately, and 2) whether they use their benefits legitimately. Specifically, these two factors are evaluated based on the perceived legitimacy of a disability and supposed drug use, respectively. Social cohesion among neighbors hinges on these moral judgments of welfare fraud. When neighbors are perceived to be cheating the system, trust and social support erode. When a community faces high rates of poverty, addiction, and disability, these individual-level judgments can aggregate to a larger breakdown of the social fabric. These findings suggest that national stereotypes of welfare fraud can become infused in high-poverty communities, impacting social cohesion and trust on a local level.