Disabling America

How more and more ‘disabled’ Americans affects the shrinking U.S. labor force

By James Pethokoukis

Now that the labor force participation rate is at its lowest level since 1981, it’s a good time to take another look at how the rising number of disabled Americans affects the official size of the workforce. Here are disturbing facts from Bloomberg:

– The number of workers receiving Social Security Disability Insurance jumped 22 percent to 8.7 million in April from 7.1 million in December 2007, Social Security data show.

– That helps explain as much as one quarter of the decline in the U.S. labor-force participation rate during the period, according to economists at JPMorgan Chase & Co. and Morgan Stanley.

– Disability recipients may account for as much as 0.5 percentage point of the more than 2 point drop since the end of 2007, the economists calculate, and that contribution could grow when some extended unemployment benefits expire at the end of this year.

– More than 99 percent of all SSDI beneficiaries remain in the program until retirement age, David Greenlaw, a managing director in New York at Morgan Stanley, wrote in a March research note, citing government data. The program provides an average of $1,111 in monthly income to eligible workers with a physical or mental impairment that will last at least 12 months or result in death, according to Social Security.

– The number of people collecting disability surged as the economy contracted, with the share of the U.S. population between the ages of 25 and 64 on SSDI climbing to a record-high 5.3 percent in March from 4.5 percent in 2007. Applications per 1,000 working-age people rose to 18 last year from 8 in 1990.

– The program spent $132 billion last year, more than twice as much as in 2000. Once the trust fund dries up, the program’s incoming revenue will be enough to cover only about 80 percent of scheduled benefits, the trustees said.

So more people are disabled and can’t work even as a) the overall health of Americans improves, and b) fewer and fewer jobs require a great deal of physical exertion?

Economists David Autor at the Massachusetts Institute of Technology in Cambridge and Mark Duggan at the University of Pennsylvania’s Wharton School in Philadelphia says SSDI “appears in practice to function like a nonemployability insurance program for a subset of beneficiaries. Also, less-stringent screening procedures, more attractive benefits and a waning need for less-skilled workers have bolstered SSDI rolls, they said. In addition, “difficult-to-verify disorders,” including muscle pain and mental illness, more easily qualify for SSDI under program reforms, Autor wrote in a 2011 paper.

Hmmmm …