To me, the number that sums up the year’s doldrums is the 1.27 million increase in the number of disabled Americans without jobs from November 2011 to November 2012. This statistic reflects not only the sluggish recovery but also a drifting nation, badly in need of tough medicine.
There are now 8.8 million workers receiving disability payments from Social Security. I find this number haunting.
The disabled are part of the far larger number of Americans who have left the labor force altogether since the recession, and who don’t seem to be coming back. About 88.9 million people in the U.S. are now out of the labor force, 2.4 million more than a year ago and 11.4 million more than in 2006. Thirty years ago, there was a 40-to-1 ratio between the total labor force and those workers receiving Social Security disability payments. Today that ratio is less than 18-to-1.
In November 1982, unemployment hit its postwar high of 10.8 percent, far higher than the current rate of 7.7 percent. But the total share of workers who are either unemployed or receiving disability payments from the government totals 12.6 percent today.
Puzzling Rise
The steady rise in disability claims presents something of a puzzle. Medicine has improved substantially. Far fewer of us labor in dangerous industrial jobs like the ones that originally motivated disability insurance. The rate of deaths due to injuries has plummeted. Behavior that can cause disability, such as alcohol use and smoking, has declined substantially. American age-adjusted mortality rates are far lower than in the past.
The aging of the baby-boom generation is often cited as one explanation for the rise in disability insurance rolls. Yet the economists Mark Duggan and Scott Imberman estimate that “this factor can explain just 15.5 percent of the growth in the likelihood that a nonelderly adult male receives DI benefits.”
The two primary alternative hypotheses for the rise are that either work has become less attractive or that disability insurance has become more attractive and available. The disability-claims approval process and the wider society itself have become more accepting of people receiving the benefits even if they have no visible ailment.
Duggan and Imberman argue that changes in the award formulas for recipients have made disability substantially more generous for poorer workers. For example, a male worker who is 30 to 39 and in the bottom 25th percentile of earnings distribution could expect disability insurance to pay 41 percent of his previous earnings in 1984 and 49 percent of his previous earnings in 2002.
An older study examined a Canadian experiment and found that as disability became more generous, the overall labor supply declined. Duggan and Imberman say changes in availability can plausibly explain about one-quarter of the increase in the insurance rolls from 1984 to 2002.