Politics & Policy

How Do We Get Those Able to Work Off of Disability?

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Congress should revise Social Security disability insurance to give them incentives to re-enter the labor force.

With the Social Security disability-insurance (SSDI) program heading toward insolvency before the end of next year, lawmakers are looking for reforms to help individuals with disabilities but the capacity to work to return to work. Why it is so hard to get them to do so? Olga Khazan explores the question in a new piece in The Atlantic. Even those awarded benefits for a temporary condition tend to stay on Social Security for the rest of their lives.

It’s a tough but urgent question. The disability program has seen tremendous growth in both costs and the number of beneficiaries in recent decades. Since 1990, the share of the working-age population receiving disability benefits has more than doubled — from about one in 40 individuals to about 1 in 20 today. Spending on SSDI has doubled in real terms since 2000.

Opponents of broader reforms argue that these increases are a natural outcome of demographic and other explained factors and that therefore they are nothing to worry about. Robust research at the Federal Reserve Bank of San Francisco, however, suggests that the exact opposite is the case.

Researchers at the Bank find that only some of the increase in SSDI spending was due to aging baby boomers requiring increasing assistance with disability needs, to a greater number of working women becoming insured under the program, and to the Social Security retirement age edging up slightly over the past decade.

About half of the program’s expansion cannot be explained by these demographic factors or changes in the labor force. Moreover, the growth in beneficiaries has occurred at the same time that health outcomes have improved nationwide and jobs have become less physically demanding.

Instead, it appears that as SSDI benefits have become more accessible and more valuable, in terms of how much of a person’s wages they replace, individuals have increasingly turned to the program as an early retirement and long-term unemployment program. In fact, individuals who apply for SSDI at age 62 (the earliest one can retire) receive higher Social Security payments for the rest of their life relative to those who opted to retire early.

According to research by Heritage Foundation labor economist James Sherk, about one-third of the drop in labor-force participation from 2007 to 2013 is due to 2.1 million more Americans going on SSDI.

It is well known that recessions coincide with more Americans seeking assistance from government programs, including disability, to make ends meet. The problem is that when those with marginal or temporary disabilities succeed in getting on SSDI, they tend to stay in the program — and over time their skills erode.

The Social Security Administration has tried for decades to encourage individuals on SSDI to return the work. The most notable effort is the program Ticket to Work. In her Atlantic article, Khazan explores Ticket to Work to determine why this well-intended program is failing so miserably in returning people on disability benefits to independence through work.

The core problem appears to be twofold. For one thing, there is no clear expectation that individuals with marginal and temporary disabilities return to work. Plus, with a lifetime of cash benefits and free health-care benefits at stake, the incentives are stacked against any serious return-to-work effort by beneficiaries.

“There is nothing in the ticket that gives you an incentive to use it to go back to work unless you want to,” according to Bruce Growick, former president of the International Association of Rehabilitation Professionals, who helped shape Ticket to Work in the 1990s.

Nicole Maestas, a senior SSDI economist at Rand, suggests that the incentives are all wrong: “Think about that decision. . . . Think about [trading in] guaranteed benefits for life.”

As Congress explores options to address SSDI’s impending trust-fund shortfall, it should seriously consider replacing permanent benefits with a needs-based period of disability that better reflects the individual’s condition and acknowledges future work capacity. Moreover, Congress and the Social Security Administration should explore mandatory employment services for those beneficiaries with significant work capacity struggling to find jobs.

Together these reforms would firmly establish the expectation of work where capabilities exist. They would also make better use of the existing state-based infrastructure to assist individuals with vocational rehabilitation and other work efforts.

The proposed Protecting Social Security Disability Act of 2014, introduced by former senator Tom Coburn (R., Okla.), would grant such time-limited benefits when recovery is expected for those on the rolls. It would also establish pilot projects to test early intervention efforts to help work-capable individuals with disabilities return to jobs before ever getting on the rolls.

Many individuals with disabilities want to participate in their communities through work, but SSDI discourages them from doing so. Better aligning benefits and work conditions with individual needs and abilities can go a long way in helping individuals with disabilities reintegrate into the labor market. And it can improve their living standards with the prospect of earning wages that will exceed their government benefits over time.

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