Previewing the Social Security Trustees Report
The number of disabled worker beneficiaries grew by 187 percent between 1980 and 2010, much faster than the 39 percent growth in the workforce. Much of this can be explained by the aging of the Baby Boomers, who were 45-64 in 2010 (peak years for disability), and the rise in the number of insured women, according to recent testimony by Social Security Chief Actuary Stephen Goss (pdf). (An additional factor was the increase in Social Security’s normal retirement age (pdf) from 65 to 66, which delayed when beneficiaries are shifted from disability to retirement benefits.)
However, age-adjusted incidence rates also increased from 3.1 percent in 1980 to 4.4 percent in 2010.1 This and the fact that the Disability Insurance (DI) trust fund is projected to run out in 2016 has brought a flurry of negative attention to the program. Advocates are bracing for more when the Social Security Trustees Report is released tomorrow.
Much of the media coverage focuses on workers with seemingly minor impairments who apply after losing their jobs, giving the impression that DI is luring people out of the workforce and causing a drain on public resources. In a particularly misleading story, National Public Radio dubbed the disability program a “hidden, increasingly expensive safety net.” But as a new report from the Center for American Progress (pdf) points out, DI benefits are a modest lifeline for disabled workers, and the difficult and lengthy application process makes it highly unlikely that workers with real options will choose this route. Even among the more than half of applicants who are rejected, relatively few find jobs later (pdf), though the fact that some applicants who nearly qualify manage to engage in “substantial gainful activity” suggests that DI does have a modest dis-employment effect.
Does this mean there’s nothing to worry about? Yes and no. As the National Academy of Social Insurance explains in a new brief (pdf), the depletion of the DI trust fund is no big deal. Congress has periodically reallocated funds from the Old Age and Survivors Insurance (OASI) fund to the DI fund, and should do so again. Because DI is a relatively small part of Social Security, this would have a small impact on OASI while allowing both programs to pay full benefits through 2033 (about three-fourths of scheduled benefits thereafter) even if nothing else is done to shore up the system’s finances.
Nor is the bump in applications due to the Great Recession and sluggish recovery a cause for concern. That’s what it’s there for. When jobs are scarce, workers in poor health are more likely to lose their jobs and less likely to find new ones. Disability insurance, like unemployment insurance, not only helps workers who lose their jobs but also serves as an automatic stabilizer, helping the economy recover, which benefits everyone.
If there’s anything to worry about, it’s the longer-term rise in disability rates for less educated workers, especially men. The problem, however, isn’t overly generous DI benefits, which are barely above official poverty thresholds (pdf), but rather a dearth of decent blue collar jobs, especially those that can accommodate workers in poor health. The fact that these workers are applying at earlier ages is often cited as a problem for the program, even though these workers’ benefits also tend to be much lower (pdf). The real tragedy, however, is that workers who want jobs are consigned to decades in near poverty on the margins of society.
1. Goss’s written testimony says 31 and 44 “percent,” but the accompanying figure correctly shows 31 and 44 per thousand.