Tuesday, June 25, 2013

Paying People Not to Work: Disability's Safety Net Broadening Into a Hammock

  • Amount of working-age Americans receiving federal disability payments has roughly doubled in 30 years. 
  • It rose from 23 of every 1,000 workers in 1980 to 47 of every 1,000 workers in 2011.
  • 5% of the potential work force is more or less permanently out of action.
Have we somehow devolved into a far less safe society with our endless helmet, seatbelt and cell phone laws? Hardly. This article summarizes nicely - The Rise of Disability - NYTimes.com:
...The government likes to describe the increase mostly as the result of two demographic trends. Americans, on average, are getting older, and old people are less healthy. Also, as more women have entered the labor force, the share of female workers with health problems has climbed closer to the male average.

Independent experts, however, see substantial evidence that disability insurance increasingly serves as a safety net for people who cannot find jobs – people, that is, who might still have the ability to perform at least some kinds of work.

A new research note from the Federal Reserve Bank of San Francisco estimates 40 percent to 60 percent of the growth in disability claims in recent decades is a result of the program’s attracting a broader constituency. They note that it has become easier to qualify, as claims increasingly are judged on subjective criteria. And the benefits have become more lucrative, particularly for low-wage workers. The formula is based on average wages, so rising income inequality has increased benefit payments even as the wages of most workers have stagnated.

The difference is important because disability insurance is a very sticky kind of safety net. Historically, few people who qualify for disability during downturns return to the work force during rebounds, creating a twofold drag: Fewer workers and more people depending on each of those workers to pay their taxes.

The difference also is important because the disability program is running out of money. The government projects that the disability fund will not be able to meet all claims in full by 2016....
Shared from The Rise of Disability - NYTimes.com | Binyamin Appelbaum.