Unemployed US workers who’ve exhausted their jobless benefits are not hiding out in the Social Security disability insurance system, according to a new study from the University of California, Berkeley. Although there has been a 25% rise in disability rolls — equaling 11 million Americans — since the Great Recession began, economist Jesse Rothstein found no correlation between expiring jobless benefits and rising disability claims. As the WSJ summarizes:
When the unemployment rate started rising in 2008 and 2009, the government extended unemployment benefits, leading to a drop in the number of people exhausting their payments. Yet the number of people filing for disability kept on rising. In more recent years, the government has cut back unemployment benefits, leading to an increase in expirations, but the number of disability applications has remained flat or even slowed.
Regarding the correlation between rising unemployment and rising disability filings, Rothstein suggests a weak labor market prevents injured workers from finding employment in jobs they could still do. Example: A construction worker with a bad back who’s willing to do a desk job.
Three additional points:
1. This study more or less syncs with one from Goldman Sachs that notes the rise in SSDI beneficiaries has only modestly outstripped the Social Security Administration’s pre-recession forecasts. Goldman: “Most of the growth in SSDI beneficiaries seems to be due to a larger and older population.” Combined, the two studies suggest SSDI is not turning the US into 1980s Europe, where persistently high unemployment was blamed on easy availability of long-term jobless benefits.
2. We should still try to get people off disability, since once they start receiving benefits, they rarely return to the labor market. For instance: A study of Norway’s return-to-work program — benefits of disability insurance recipients are reduced by roughly $0.6 for every $1 in earnings — is encouraging.
3. Greater effort needs to be made to aid the 4 million long-term US jobless, possibly through relocation subsidies or work-share programs, to avoid higher structural unemployment. Along those lines, AEI’s Kevin Hassett thinks even broader and more creative employment subsidies might be necessary:
If somebody’s 40 years old, and not employed for 25 years, that costs governments lots of money, and if we think rationally about reducing spending, maybe it’s worth it to pay for their first year at a private employer. Direct hiring, or a direct subsidy for hiring, could save taxpayers a fortune. … Suppose we think a 40 year old will be disconnected until retirement, and it will cost the government $2 million to support that person, both in terms of direct monies and the tax dollars we don’t get. Why not pay a search firm $100,000 if they can document that they found that guy a job? It turns out Germany set up a program like that, that has had some pretty good success. It’s the kind of creative thinking that we should all embrace, because the situation is really terrible.