Increased Unemployment Rate Jeopardizes Longevity of Disability Program

Submitted by Daniel on Mon, 10/19/2015 - 12:47

Beginning in December 2007, the United States suffered an economic downturn considered to be the worst financial crisis since the Great Depression. During this time period, layoffs increased at an alarming rate. In the fourth quarter of 2007 there were 5.7 million layoffs. By the first quarter of 2009, that number had quickly grown to 7.6 million—a 34% increase. The unemployment rate grew from 5.0% in December, 2007 to 9.5% by the end of the recession in June 2009.

As the unemployment rate reached new highs, so did the number of applicants for Social Security Disability benefits. The number of disability claims in the United States climbed 21% from 2008 to 2009, reaching 2.8 million. The graphic below demonstrates the connection between the unemployment rate and the number of disability applications.




Stephen Goss, the Chief Actuary of the Social Security Administration, reported that the 2008-09 recession led to a nearly record breaking high of “disability incidence”—the number of healthy workers becoming newly disabled.

Although the rapid growth of disability claims would seem to indicate a general decline in the nation’s health, the coinciding rise and fall of the unemployment rate suggests that there may be a different explanation.

Goss suggests that an increase in disability claims during an economic downturn is to be expected. He comments, “When employment is good—when employers are trying to employ lots of people—people with impairments, like everyone else, find it easier to find a job."

Unfortunately, when employment is bad, individuals with disabilities are among the first to be laid off. In an economic downturn, employers who were previously willing to accommodate individuals with disabilities can no longer afford to do so. Older, partially disabled workers lose their jobs and are forced to seek out other ways to support themselves.

An academic study conducted by Matthew Rutledge reports that jobless individuals often turn to disability benefits once they have exhausted their unemployment insurance. This suggests that when jobs are scarce, individuals who would have previously worked despite a disability are turning to Social Security Disability benefits.

Is the Economic Downturn Responsible for the Current Instability of the Social Security Disability Program?

The economic recovery from the most recent recession has been the slowest in U.S. history. The unemployment rate is still high, and the Social Security Disability Insurance trust fund is projected to be insolvent by 2016. The correlation between the unemployment rate and the number of Social Security Disability applications has raised concerns that the marginally disabled, unemployed population has expanded the Social Security Disability program beyond its intended purpose of assisting the disabled.

According to data provided by the Social Security Administration, the percentage of applicants approved for benefits has not changed to counterbalance the increase in applications. This means that, although the approval rate from 2007 to 2010 remained at about 35%, the increase in applications has led to an increase in disability awards.

The following table demonstrates the growth in approved disability applications:

Year Applicants Annual Change Awards Annual Change
2007 2,190,196 2.63% 823,106 1.29%
2008 2,320,396 5.94% 895,011 8.74%
2009 2,816,244 21.37% 985,940 10.16%
2010 2,935,798 4.25% 1,052,551 6.76%
2011 2,878,920 -1.94% 1,025,003 -2.62%

*Data from the Social Security Administration

Although the poor economy has contributed to the rapid growth of the Social Security Disability program, Kathy Ruffing, senior fellow at the Center on Budget and Policy Priorities, suggests that the rise in disability rolls can also be attributed to demographic changes:

  • An aging U.S population: The large number of people born between 1946 and 1964, known as the Baby Boomers, is heading toward retirement age. However, aging often takes a toll on the human body long before retirement. As this age group has gotten older, the number of disability cases has grown substantially.
  • More women are qualifying for benefits: To qualify for disability benefits, workers must have maintained employment for at least one quarter of their adult lives, including five of the past ten years. Until relatively recently, a very small number of women had worked long enough to meet these requirements. In the 1970’s and 80’s a significantly large number of women joined the work force and now qualify for disability benefits. The following graphic from Ruffing’s research demonstrates the increase in female disability beneficiaries.


  • The Social Security Full Retirement Age was raised from 65 to 66: Once disabled workers reach full retirement age, they receive retirement benefits. The increase of the retirement age delayed retirement benefits for a large number of people, causing them to apply for disability benefits. According to Ruffing, “In December 2011, more than 400,000 people between 65 and 66 — nearly 5 percent of all DI beneficiaries — collected disabled-worker benefits; under the rules in place a decade ago, they would have been receiving retirement benefits instead.”

Conclusions

The financially strapped Social Security Disability program has become the focus of national scrutiny. Media stories and academic studies are quick to credit the bad economy for the program’s instability. Although the cause is still being debated, it is evident that the disability rolls have grown rapidly—in a manner that, financially, cannot be sustained.

The flood of new applications has drastically slowed the approval time and the Social Security Administration cannot keep pace. The backlog of applications is keeping the severely disabled from getting the benefits they need to survive. With the Social Security Disability Insurance trust fund running low and the application process often taking up to two years, the need for change is imminent.

The economic downturn and the rise in Social Security Disability rolls are undoubtedly connected. This indicates that, if the economy were to heal, the number of people applying for disability benefits will decrease. However, there are many factors that have led to the program’s rapid expansion and unfortunately, there is not one clear-cut solution that will address all of them.

In the coming weeks policy makers will reach decisions to implement tax increases and spending cuts in an attempt to remedy the country’s budget deficit. As of right now, it is unclear how these changes will affect the Social Security Disability program. One thing is evident-- If a solution is not found quickly, the future is uncertain for the countless individuals who depend on disability benefits.

Sources:

Heritage Foundation calculations using data from the Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey”/Haver Analytics, 2007–2009.

Bureau of Labor Statistics, Spotlight on Statistics: The Recession of 2007-2009, http://www.bls.gov/spotlight/2012/recession (February, 2012).

Michael A. Fletcher, Jobless are Straining Social Security's Disability Benefits Program, http://www.washingtonpost.com/wp-dyn/content/article/2010/09/13/AR2010091306493.html (September 14, 2010)

Damien Paletta and Dionne Searcey, Jobless Tap Disability Fund, http://online.wsj.com/article/SB10001424052970204296804577121392750460030.html (December 28, 2011).

Kathy Ruffing, Social Security Disability Insurance is Vital to Workers with Severe Impairments, Center on Budget and Policy Priorities (August 9,2012)

Matthew S. Rutledge, THE IMPACT OF UNEMPLOYMENT INSURANCE EXTENSIONS ON DISABILITY INSURANCE APPLICATION AND ALLOWANCE RATES (April 2012)

Blog comments

Eric

In reply to by Stephan lane (not verified)

Hi Stephan,
To be eligible for disability benefits, a person must be unable to engage in substantial gainful activity (SGA). A person who is earning more than a certain monthly amount (net of impairment-related work expenses) is ordinarily considered to be engaging in SGA. The amount of monthly earnings considered as SGA depends on the nature of a person's disability.

Best Wishes,
Eric

Wed, 05/17/2017 - 16:27 Permalink
Raylnn (not verified)

I know a person who was fire cheif of a fire company, works on cars, goes metal detecting every other day and does remodeling in his home! The person recieves disability for detoriated disk in back! If he can do all this how can he recieve disability! This guy isnt even 40 years old! Besides him there is 3 others in the home 2 on disability and one who works! How????????

Wed, 06/14/2017 - 15:14 Permalink
Bryan

In reply to by Raylnn (not verified)

Hi RayInn,
While he can do those things, they may not be strenuous enough to be considered work activities, or his condition is severe enough to be unable to work, but not enough to leave him unable to do those listed activities.

Wed, 06/14/2017 - 17:11 Permalink
Tashone (not verified)

My landlord wants to use most of my children ssi benefits for my rent can they do that? How am I suppose to get them most of the things they need if my landlord is taking the majority of they benefits?

Thu, 12/07/2017 - 09:05 Permalink
Bryan

In reply to by Tashone (not verified)

Hi Tashone,
Your landlord may not be legally able to do that, as those benefits are intended to pay a portion of that rent, but not all of it.

Thu, 12/07/2017 - 11:24 Permalink
Sam (not verified)

My friend draws disabled child soc sec on his deceased parent and some on ssi. The other parent died and there is money coming from a lawsuit. How will it affect his disabled child soc sec, ssi and food stamps. Along with medicare and Medicaid pays the premium, yearly deductible and co-pays of Medicare.

Wed, 01/31/2018 - 18:48 Permalink
Bryan

In reply to by Sam (not verified)

Hi Sam,
that money may be considered income the month that this person receives it and a financial resource for the months after, so that may affect any income-based benefits they receive.

Thu, 02/01/2018 - 13:24 Permalink
Shawn (not verified)

I plan on getting married in May. I’m on Ssdi and live in Indiana. My fieance is on Ssdi also and currently live in Kennedy. We haven’t 100% made our minds up yet as to which state to live in at the moment but we do have plans to move close to family in Indiana in the near future. Also we want to know if our Ssdi benefits will be affected in any way? We do have one dependent child under my fieance’s ssdi. Will this be affected in anyway?

Fri, 04/20/2018 - 12:09 Permalink
Eric

In reply to by Shawn (not verified)

Hi Shawn,

When you get married, your SSDI benefits will not be affected. SSDI is based on individual record and not income.

Also if you move to another state, your benefits won't be affected because Social Security is a federal, not a state program. You should notify the SSA if you do plan to move, though.

Fri, 04/20/2018 - 12:54 Permalink

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