Economics

Land of the free, home of the disabled (more on those phony unemployment numbers)

JPM’s Mike Feroli is one of the best economists on Wall Street. In a new Economic Research Note he finds the number of Americans claiming disability is rising rapidly:

As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labor force—currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began. The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.

This spike in people claiming disability is keeping the unemployment rate artificially low (while I cheered the recent unemployment data, Feroli’s note bolsters Jimmy P’s claim that the latest unemployment figures are a little “phony”).

What’s most striking about the increase in disability is how out of character it is given the changing nature of the economy. Feroli notes:

The long-run increase in disability benefit payments, as well as their acceleration during times of weak labor markets, is puzzling along two dimensions. First, improving aggregate health outcomes and an increasingly service based economy would suggest a trending down in disability insurance rolls. Second, health outcomes are countercyclical, improving as the economy worsens (fewer workplace injuries, etc.) while disability recipiency appears to increase when the labor market is weak.

One thing that might be driving this spike? While Charles Murray’s latest book looks at the decline of industriousness among certain segments of American society, here’s another factor—network effects:

Income support programs may be susceptible to network effects—benefit growth may beget more benefit growth, as increased program usage generates learning among neighbors and others within a social network about the benefits that are available. Judging the magnitude of these effects is difficult, but one thing that can be said with more certainty is that the recent data show little letdown in the growth of the number receiving federal disability benefits.

5 thoughts on “Land of the free, home of the disabled (more on those phony unemployment numbers)

  1. How in the world is this nation ever going to get back to where used to be Great America, if the government have to bail everyone. We need to teach people if you don’t work hard, you will face poverty. And children will be left behind if they don’t study and work hard.

    • So naive. Many of these people worked very hard and were seriously if not critically injured on the job. One I know personally was electrocuted. they were able to resuscitate him but his left bicep and connecting tissues were removed along with massive nerve damage. Can’t use his left arm at all, but he goes to therapy everyday and prays to join the workforce again. He made a lot more money working with OT than the 65% of base salary he gets now. He is lucky to be alive and very much disabled. Are there a few ripping off the system? You bet but not for long investigators video record these people on a regular basis and if caught ‘faking it’ it is called fraud and they are prosecuted. Not that I worked for and insurance investigative company or anything like that. LOL

  2. Do we forget an extraneous variable? Like when the economy is bad a majority of the laid off workers increase the work load and hours of the few remaining? Those over worked employees are much more prone to have an accident. Plus employers trying to cut costs tend to cut corners also leading to an uptick in injuries in the work force. Third and perhaps the biggest reason id the amount of the workforce being required to work for a third party as a sub-contractor without benefits or any form of workman’s comp insurance leading to the spike in federal disability claims. One more way the 1% are screwing the 99%. And this is a lead in to why we should reduce or eliminate federal disability insurance. Just like they are attacking Social Security and medicare after they stole the middle-class retirement income through corporate bankruptcy. Many thousands worked twenty to thirty years to have their retirement stolen out from under them by the likes of BAIN capital, yes that is exactly why Romney is so damn rich. So the 1% stole their pensions and retirement accounts forcing them on Social security and medicare and then have the nerve to complain that SS and Medicare is too expensive. So wrong on many levels.

  3. sara, it’s time to wake up! We need to teach people that even if you “work hard” as you say–which needs defining in its own right–you will still face poverty. That is TRUTH. Your philosophy of scaring people into ‘work hard or face poverty’ is based on the false premise that you will not face poverty if you ‘work hard.’ Do you know how many people who have ‘worked hard’ all their lives are now living in poverty? Don’t you realize, sara, that the people who make the most money in this country are the ones who do the least amount of ‘hard work?’ And they are also the ones who attempt to hold the power of life and death upon the rest of us.
    What kind of hard work do you want children to do? Do you want to go back to Industrial Revolution times where they worked 16 hour days and many ended up incapacitated or prematurely dead? I’m curious–besides studying how do you want children to ‘work hard’? Studying hard is great but most will only become corporate pawns with no sense of security or peace.
    Oh, and forget it, sara; this nation will never return to its days of being ‘Great America.’ The reason being this land is full of cheats and crooks starting from the very top. They will stop at nothing to get what they want, and that includes tearing this country apart brick-by-brick.
    I certainly hope you were and still are furious over the Wall Street and bank bailouts. It seems though that when “Average Joe” gets any sort of assistance from the gov’t there is outcry louder than the deranged detonations of Glenn Beck.

  4. You will be required of measuring the openings where the sliding patio doors will
    keep falling on your head. If you don’t have to worry about cleaning the blinds off dust and grime.

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