Reconciling Findings on the Employment Effect of Disability Insurance

Authors

Abstract

Over the last 25 years the Social Security Disability Insurance Program (DI) has grown dramatically. During the same period of time employment rates for men with work limitations showed substantial declines in both absolute and relative terms. While the timing of these trends suggests that the expansion of DI was a major contributor to employment decline and raises questions about the targeting of disability benefits, studies using denied applicants suggest a more modest role for DI expansion. In order to reconcile these findings, we decompose total employment changes into population and employment changes for three categories: DI beneficiaries, denied applicants and non-applicants. Our results show that during the early 1990s, the growth in DI can fully explain the employment decline for men only under an extreme assumption about the employment potential of beneficiaries. For the period after the mid-1990s, we find little role for the DI program in explaining the continuing employment decline for men with work limitations.

Key Findings

  • Over the last 25 years the Social Security Disability Insurance Program (DI) has grown dramatically. During this period employment rates for men with work limitations showed substantial declines in both absolute and relative terms.
  • While these trends coincide, we find that the decrease in employment among those with work limitations during the early 1990s can only be partly explained by the growth of DI.
  • For the period after the mid-1990s, we find little role for the DI program in explaining the continuing employment decline for men with work limitations.

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Project

Paper ID

WP 2010-239

Publication Type

Working Paper

Publication Year

2010
pavement-enterprise