Monday, March 28, 2011

Disability Blues

Disability (with a capital “D”) payouts within the United States have been on the rise.
Now Disability for many people is just that.  There is something about them that makes their employment possibilities very close to zero.
Of course there have also been a number of employable folks who simply would rather not work.  It does work very well if you can have one person in the family on Disability for the steady stream of income, while the other adult works.  It is one way to boost the income of lower income families in the steady reliable way that minimum wage jobs don’t provide for:  call it “paying the rent” insurance. So most people I knew who were on disability tend to be on the lower end of the pay scale:  either of necessity or choice.
However, as the wages of lesser educated workers, service workers, tradesman, etc., decline, and positions become difficult to obtain, the Disability option becomes much more attractive.
Disability is not particularly easy to get.  And generally you do have to have some sort of disability to get Disability.  But many people can and will find work who have disabilities.  But with very limited means of advancement for the non-college educated, and lowered pay scales, the work would need to pay more than the Disability payments to make it worth their while.
Men Not Working, and Not Wanting Just Any Job, Loius Uchitelle, and David Leonhardt, New York Times, July 31, 2006.
The fastest growing source of help is a patchwork system of government support, the main one being federal disability insurance, which is financed by Social Security payroll taxes. The disability stipends range up to $1,000 a month and, after the first two years, Medicare kicks in, giving access to health insurance that for many missing men no longer comes with the low-wage jobs available to them.
No federal entitlement program is growing as quickly, with more than 6.5 million men and women now receiving monthly disability payments, up from 3 million in 1990. About 25 percent of the missing men are collecting this insurance.

The ailments that qualify them are usually real, like back pain, heart trouble or mental illness. But in some cases, the illnesses are not so serious that they would prevent people from working if a well-paying job with benefits were an option.

The disability program, in turn, is an obstacle to working again. Taking a job holds the risk of demonstrating that one can earn a living and is thus no longer entitled to the monthly payments. But staying out of work has consequences. Skills deteriorate, along with the desire for a paying job and the habits that it requires.

The number of awards has spiked in the downturn, rising 28% since 2007. This surge follows decades of growth. DI accounted for about 10% of Social Security spending in 1989 but 18% by 2009…DI gave $110 billion to disabled workers, up almost 420% [since 1990]… A solution is needed, and soon. The DI trust fund is expected to dry up in 2018, 22 years before the trust fund for Social Security retirees does.

Ageing would seem another obvious explanation, as those aged 50-64 account for almost 60% of DI awards. But the rolls grew quickly even when the share of 50- to 64-year-olds was steady…

It should come as little surprise that enrolment jumps during recessions. Till von Wachter of Columbia University offers three explanations. First, impaired workers may be among the first to be sacked. After they are laid off, they may find that they qualify for DI, as is the case for many of Mr Scully’s clients. Second, DI’s criteria explicitly include economic factors, such as the ability to retrain. Third, those desperate for cash may use more subjective criteria, such as mental illness and “bad back”, to try to win benefits. Many will fail, but they can appeal.

And then this one most recently:
Insolvency Looms as States Drain U.S. Disability Fund , Damian Palletta, Wall Street Journal, March 22, 2011.

The SSDI is set to soon become the first big federal benefit program to run out of cash—and one of the main reasons is U.S. states and territories have a large say in who qualifies for the federally funded program. Without changes, the Social Security retirement fund can survive intact through about 2040 and Medicare through 2029. The disability fund, however, will run dry in four to seven years without federal intervention, government auditors say.

In addition to the uneven selection process, SSDI has been pushed to the brink of insolvency by the sour economy. A huge wave of applicants joined the program over the past decade, boosting it from 6.6 million beneficiaries in 2000 to 10.2 million in 2010. New recipients have come from across the country, with an 85% increase in Texas over 10 years and a 69% increase in New Hampshire.

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