Are We Paying People To Be Disabled?

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.

Binyamin Appelbaum at The New York Times economics blog.

Comments (11)

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  1. JD says:

    Not surprised. Follow the incentives.

  2. Richard says:

    At some very low income margin, sure, being disabled is much more attractive.

    But being disabled hardly provides a secure income base where people can enjoy their lives.

    The disincentive effects are at the very, very bottom of the income distribution. Where we are willing to suffer these disincentives (and relative inefficiencies) to provide for the individuals, in the hope they use the money on needs we consider important.

  3. Richard says:

    Also, part of the shift in numbers is due to states telling people to apply for disability instead of unemployment, as it shifts the burden of payments away from states and towards a more federal level.

    With this labor market, this is a short-term outcome.

  4. Greg says:

    The incentives are all there, some of the standard for SSDI are ridiculously vague. The program is practically begging to be abused.

    • Miguel says:

      Exactly, the same thing has happened in states that have legalized marijuana for medicinal usage, the disorder/pain standards are so vague for a license, that someone can claim that they have “night-blindness” and still get a medical marijuana license.

  5. Nigel says:

    What is the difference monetarily between unemployment benefits and disability insurance?

  6. Tommy says:

    This is interesting to see how we should determine disability. I can see how it can become easy for people to claim disability when that may not always be the case.

  7. Ralph says:

    And this is news to who…