Rejection from the Disability Insurance Program and Dependency on Social Support

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Abstract

Recent studies find that many workers do not return to the labor force after their applications for Disability Insurance (DI) are denied. It is, therefore, important to understand how this group funds their consumption. This paper uses the Survey of Income and Program Participation linked to administrative data to examine the social support participation behavior of rejected applicants. By following cohorts of individuals from 10 years before to 10 years after filing for DI, this paper shows that rejected DI applicants are at most 10 percent more likely to depend on social support programs than healthy workers. More general models show that at the time of application rejected applicants are 25 percent more likely to depend on social support programs than healthy workers. These effects decrease across time, but up to 10 years after filing, rejected DI applicants are still up to 12 percent more likely to depend on social support programs. These are the same levels of social support participation exhibited by DI beneficiaries. While rejecting more DI applicants may reduce DI outlays, these results suggest that rejected applicants are more likely to depend on other federally funded assistance programs to fund their early retirement.

Key Findings

  • Social support participation rates of rejected DI applicants differ by age cohorts.
  • At the time of filing young rejected applicants are 24% more likely to depend on social support programs than healthy workers. Older workers are 18% more likely to depend on social support programs at the time of filing.
  • Participation rates decrease across time but up to 10 years after filing, young rejected DI applicants are still on average at most 12 percent more likely to depend on social support programs. Older rejected workers are at most 7 percent more likely on average to depend on social support programs.
  • Younger rejected DI applicants are on average 7 percent more likely to participate in social support programs than DI beneficiaires. The spillover effects are smaller for the older cohort at 4 percent.

Citation

Chen , Susan E. (2014). “Rejection from the Disability Insurance Program and Dependency on Social Support.” Michigan Retirement Research Center (MRRC) Working Paper, WP 2014-305. http://mrdrc.isr.umich.edu/publications/papers/pdf/wp305.pdf

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Paper ID

WP 2014-305

Publication Type

Working Paper

Publication Year

2014