September 21, 2013
The Washington Post had an interesting article on the sharp rise in disability rates in the downturn. It would have been helpful to include some additional information.
One important reason for the rise in disability not connected to the recession, is the increase in the normal retirement age. This was increased from 65 for people who turned 62 before 2002, to 66 for people who turned 62 after 2008. The rise in the normal retirement age means that people on disability can collect benefits for an extra year before they have to turn to their Social Security retirement benefits, which will typically be less. The increase in the retirement age would have led to a substantial rise in disability rates even if there had been no underlying change in the incidence of disability.
A second point that would have been worth noting is that it is not easy to get disability. More than 60 percent of applicants are originally ruled ineligible. While many successfully appeal their rejection, the final approval rate is still below 50 percent. It is reasonable to believe that the vast majority of frivolous claims are rejected.
At one point the article discusses the notion put forward by economists David Autor and Mark Duggan that workers with little education may have substantial incentives to turn to disability:
“Benefits are hardly generous. They average $1,130 a month, and recipients are eligible for Medicare after two years. But with workers without a high school diploma earning a median wage of $471 per week, disability benefits are increasingly attractive for the large share of American workers who have seen both their pay and job options constricted.
“In 2004, nearly one in five male high school dropouts between ages 55 and 64 were in the disability program, according to a paper by economists David Autor and Mark Duggan. That rate was more than double that of high school graduates of the same age in the program and more than five times higher than the 3.7 percent of college graduates of that age who collect disability.”
While the difference between median earnings and the average disability payment is considerably lower for less-educated workers there are two other important factors that affect disability rates. First, less educated workers are far more likely to have worked at physically demanding jobs that could result in a disability. For example, someone who works as a mover is more likely to develop back problems than an office worker with a desk job.
The other difference is that the jobs that are available to less educated workers are likely to be more physically demanding. A back problem that may be an inconvenience for a desk worker may make it impossible for someone to find work as a custodian or some other low-paying job. These differences undoubtedly explain much of the difference in disability rates by education.
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