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Disabling Paradox

We had a senior honors student do a paper on the Social Security Disability program that highlighted the trend in Disability takeup rates over the past 30 years and its impact on the federal budget and long-term budget outlook for the entire Social Security program. Today 1 in 5 social security dollars are paid out to disability recipients and the disability portion of the “trust fund” is set to “run out” in about 5 years. Right now about 1 in 20 Americans receives Social Security disability, up from about 1 in 40 Americans about 30 years ago. This is all happening at a time when job safety is improving and when the proportion of jobs that are themselves risky has fallen dramatically (the economy is much more service sector oriented today than it was 30 years ago).

The paper above and the Econtalk podcast with David Autor go into a good amount of detail on what explains these trends. Like any good economist, if you want to hypothesize on why we see so many more people taking up Disability we want to start by asking how this could be the result of rational behavior on the part of potential (and actual) disability recipients. How have the benefits and costs of filing for and receiving disability changed over the past 30 years? Autor does a terrific job explaining these. And no, it’s not because Americans’ physical condition is deteriorating rapidly.

Here is one of several paradoxes that get pointed out in the podcast. When the DI portion of SSDI was written, it basically defined “disability” as an inability to work. Benefits therefore were to be paid out to people who have been demonstrated that some disability prevents them from being gainfully employed. Of course, the disability does NOT have to have been obtained from the job itself – so when I go hiking this summer and fall and knock my head on a boulder I can claim disability benefits when it prevents me from teaching next year. Please listen to the podcast for a discussion of the eligibility criteria.

However, the Americans With Disabilities Act was passed in 1990 and it has quite a different take on disability. The point of the act was to help people who have disabilities reclaim their dignity and autonomy by helping them remain employed or to seek new gainful employment. The paradox is illiustrated nicely by Autor:

Guest: So the ADA says: Disability does not mean inability to work. It simply means impairments that may stand in the way of self-sufficiency; but our goal is to help you be self-sufficient. So, the irony is that the disability program essentially can’t help you until you prove that you are incapable on your own. So, it essentially says: You want benefits? Well, prove it to me by don’t being in the labor force. Don’t be making a decent income. You have to prove it by making it clear you are deserving of help. And then we’ll help you, but not if you start working again on any serious level, because then you are not disabled, and then you are not qualified. The ADA, on the other hand, says people with a work level should be given support to allow them to maintain economic self-sufficiency and enjoy the dignity and other benefits of work. Unfortunately, since the ADA was passed, the employment rate of the disabled has only gone dow

Remember what Bastiat said in his Selected Essays on Political Economy:

The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.

7 Responses to “Disabling Paradox”

  1. Harry says:

    Foreign readers have probably not seen the television advertisements in the U.S. of Binder & Binder, a law firm specializing in Social Security claims. What they do is file the claim and by contract collect a percentage of the proceeds. They advertise themselves as the country”s most successful law firm in doing this, which I am sure is a legally true statement. In the ad they imply the government will be resistant if you have been driven over by a bulldozer and apply for SS disability. But the ad also implies that if you have back pains, they will get you more income from the government: “We’ll deal with the government; you have enough to worry about.”

    Yeah, right, like getting up at six to go to work.

    The insurance industry provides disability insurance for a breadwinner who may be concerned about life’s hazards, same as life insurance. I am waiting for Obama to propose a free $1 million whole life policy for everybody living, even illegally, in the US, provided that they do not have earned income more than two California teachers.

  2. Harry says:

    You used the imperial “we” which I assume gives some credit to the other big mind in Harkness Hall. I clicked on the link and read the paper, and I thought about how gratified my friend Mike must feel about being instrumental in opening young minds.

    Rizzo loves surrounding himself around smart students who batter down his doors for office time. We, his devoted readers, wish him, and his smart wife well. Good job, Mike.

  3. Whatever you subsidize you get more of. Whatever you tax, you get less of.

  4. Rod says:

    And what about car insurance for your government-supplied Volt?

  5. Harry says:

    What a great piece! Wintercow is a proud deserved teacher. I am glad for him, and after grading all those papers he finds peace.

  6. Speedmaster says:

    >> “Right now about 1 in 20 Americans receives Social Security disability, up from about 1 in 40 Americans about 30 years ago.”

    Wow, I listened but missed that stat. Is that true? WOW!!!!

  7. […] Few Random Morning Links … May 22, 2012By adminStat of the day: Right now about 1 in 20 Americans receives Social Security disability […]

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