Economics, Pethokoukis

The problem of exploding US disability rolls

Credit: NPR

Credit: NPR

When I worked at USNews & World Report, I once wrote a story about an Electrolux refrigerator plant in Greenville, Michigan. It shut down several years ago, taking 3,000 jobs with it. Even though it had been clear for years that Electrolux was likely going to shift production to Mexico, the workers I met had done almost nothing to prepare for the eventuality. And few seemed willing to move to cities or states with better economies.

So what happened to those unemployed, blue-collar fiftysomethings? A good chance some of them went on Social Security Disability ostensibly due to musculoskeletal issues or mental illness. The Atlantic’s Jordan Weissmann, summing up an NPR story:

1. Since the early 1990s, the number of former workers receiving payments under it has more than doubled to about 8.5 million.

2. More than five percent of all eligible adults are now on the rolls, up from around 3 percent twenty years ago. Add in children and spouses who also get checks, and the grand tally comes to 11.5 million.

3. As of 2010, its monthly cash payments accounted for nearly one out of every five Social Security dollars spent, or about $124 billion. In 1988, by comparison, it accounted for just one out of eight Social Security dollars. Because disabled workers qualify for Medicare, they also added $59 billion to the government’s healthcare tab.

It’s not that severe disabilities have become more common. It’s just that it’s now easier to qualify, and the changing economy had created an incentive to claim injury. Here’s Reihan Salam on the Dutch solution.

12 thoughts on “The problem of exploding US disability rolls

  1. Interesting how the disability rolls seem to start spiking around the early 2000′s.Is it any coincidence that was the same time that China was allowed into the WTO? It is on record that US corporate ceo’s were Horny over China and Asian economies.They had been lobbying for years to shift good paying US labor over to low wage nations.Remember Jack Welsh on a trip to India looked at a group of Indian workers in a factory and he noticed they were speaking decent English.A lightbulb went off in his head and he said wait a minute if they can speak English why am I paying the US GE call center employees a US minimum wage.Son of a gun lets offshore me some union bums US jobs.Jack Welsh an American corporate icon? To me he is an American corporate snake.Add Immelt to that list also.Ford,Carnegie,Iacocca,Heinz ,Kellogg those were true American Capitilistic visionaries who truly cared about the US laborer.

    • But if Walsh had continued to pay a higher wage for call center employees then his answer to the question, “why am I paying the US GE call center employees a US minimum wage” would have been that he was ok with inefficiently using the money he was paying those US employees. The true cost of those US employees isn’t the wages they’re paid but what other uses there were for the money they were paid. And Walsh determined the money could be more efficiently used by setting up call centers in India for less which would then leave more for using elsewhere. And I don’t think the others you site would have done any differently for if they had decided to use their scarce resources inefficiently they would surely not have done as well. Before Ford there was a personal transportation industry in this country built around building carriages locally and local stables and Ford didn’t replace that by having Model T’s built in 1000 cities around the country so that all the local workers that would eventually be obsoleted could build his cars. He just replaced American jobs around the country with American jobs in Detroit.

      • The efficiency you imply was expressed as stock options and cash bonuses for the brilliant executives that ordered the moves.
        Ford built the cars where the materials were located or simply delivered. Carriage production used materials that were locally available, although the iron parts and hardware had to be shipped.

        • The argument isn’t that Walsh used those resources more efficiently but that the responsibility for the efficient use of scarce resources should be up to the business and not the govt through the enforcement of a wage floor. Otherwise why not have govt make even more decisions as to where scarce resource get used. As for Ford, why didn’t he have all the material simply delivered at 1000 cities around the country and build the Model T close to the customer? Because the cost would have been higher then building them all in Detroit and shipping them to the customer. The fact that he was displacing jobs from the horse drawn carriage industry didn’t enter into the equation.

  2. There’s a very good Econtalk with David Autor on this topic. Lots of interesting topics, like how SSDI’s definition of disability conflicts with the Disability Act, how the rules have gotten looser as to what qualifies, the role of the law firms that specialize in bringing these cases to the govt, how only about 1% of the people who go on disability ever leave the program, etc.

    This is a classic case of a well-meaning program run wild. Certainly, there are those who are injured and truly can’t work. This program goes far beyond that, and much of the cost is due to pure fraud.

  3. Social Security Disability funding will run out in 2016</b. That is not conjecture but the conclusion of the Social Security Trustees,

    It will be interesting to see the political moves to fund past 2016.

    • well.. it’s going to do in 2016 what the same trustees say will happen to SS itself in 2030 and to HI in between.

      the interesting thing about earmarked entitlements is that they have dedicated taxes – FICA – and the way the law reads – if they do not do anything they cannot exceed spending beyond what the FICA tax generates in revenues.

      In other words, the “scheduled” benefits WILL be reduced. How they will be reduced is TBD… it could be across the board but more likely they’re going to tighten up on specific areas that have exceeded projections.

      but as pointed out before – when someone is 55 and gets laid off – and lose their health insurance, they can get full comprehensive replacement insurance for 100 a month if they qualify for disability. That bargain insurance is Medicare.

        • I think Congress takes the idea of FICA funding SS rather than General Revenues – pretty seriously.

          I’d be opposed to funding SS from General Revenues and I suspect others would also.

          I have more faith in people than conventional wisdom suggests.

          Some folks will always just want whatever they can get but a lot of people do care about the country and it’s economic and fiscal health and they know we have to make changes.

          The problems with SS and SSD are, right now, a gnat on a dogs butt compared to the general revenue budget and deficit.

          we need to deal with SS but when we elevate that priority to the same place that other much more legitimate concerns are – we diffuse the whole thing into one in which all entitlements are said to be a problem and that polarizes the issue and keeps real needed changes from happening now.

          If we got rid of all entitlement spending right now, we’d STILL have budget deficit…

          we’re spending too much money on general spending… not the earmarked spending… which is still in check but yes.. is going to run into issues in 2016 – but again if we look at the magnitude of the SSD issue verses say Medicare – there’s a proportionality aspect that needs to be acknowledged.

          Medicare is the 600lb gorilla that needs to be addressed right now… IMHO because unlike FICA and the earmarked entitlements there is no mechanism to limit spending.

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