By JOHN MERLINE - 4/20/2012
A record 5.4 million workers and their dependents have signed up to collect federal disability checks since President Obama took office, according to the latest official government data, as discouraged workers increasingly give up looking for jobs and take advantage of the federal program.
This is straining already-stretched government finances while posing a long-term economic threat by creating an ever-growing pool of permanently dependent working-age Americans.
Since the recession ended in June 2009, the number of people who've signed up for disability benefits is twice the job growth figure. (See nearby chart.) In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 put in applications.
As a result, by April there were 10.8 million people on disability, according to Social Security Administration data released this week. Even after accounting for all those who've left the program — mainly because they hit retirement age or died — that's up 53% from a decade ago.
To be sure, disability rolls have grown steadily as a share of the workforce since the 1990s (see nearby chart).
The main causes of this broader trend, according to a study by economists David Autor and Mark Duggan, are the loosening of eligibility rules by Congress in 1984, the rise in disability benefits relative to wages, and the fact that more women have entered the workforce, making them eligible for disability.
Their research found that the aging of the population has contributed only modestly to the program's growth.
But the big factor in the recent surge is the slow pace of the economic recovery after the severe recession. That has kept the unemployment rate above 8% and created an enormous pool of long-term unemployed and discouraged workers. More than 5 million people have been jobless for 27 weeks or more, nearly twice the previous high set in 1983, according to the Bureau of Labor Statistics.
"We see a lot of people applying for disability once their unemployment insurance expires," said Matthew Rutledge, a research economist at Boston College's Center for Retirement Research.
The number of applications last year was up 24% compared with 2008, Social Security Administration data show.
As the Congressional Budget Office explained : "When opportunities for employment are plentiful, some people who could quality for (disability insurance) benefits find working more attractive ... when employment opportunities are scarce, some of these people participate in the DI program instead."
The explosive growth in disability enrollment also "helps explain some of the drop in the labor force participation rate," noted economist Ed Yardeni on his blog.
In fact, the participation rate — the share of working-age people who have or are looking for a job — has fallen to 63.8% compared with 65.7% at the start of Obama's term.
Ironically, this drives down the unemployment rate, which simply measures how many people are looking for work but haven't been able to find it. When people quit looking or sign up for disability benefits, they no longer count as unemployed.
The problem is that few people who get on disability will ever participate in the labor force again. In fact, the vast bulk of those who exit Social Security Disability Insurance do so either because they hit retirement age or died.
As a result, the swelling ranks of the disabled can become a drag on the economy.
A White House report late last year noted that because "workers on SSDI rarely return to the labor force," this can result "in a loss to society of the economic contribution those workers could have made."
What's more, the explosive growth in enrollment is not only increasing the financial strain on the Social Security Disability Insurance trust fund — which is scheduled to go bankrupt in 2018 — it's boosting costs for Medicare as well, since SSDI enrollees can qualify for Medicare after two years. SSDI now accounts for more than 16% of Social Security's budget and more than 15% of Medicare's.
Reform ideas that would cut the ranks of those on disability have been bandied about for years. They include tightening eligibility rules, giving workers more options other than full-time disability and offering tax incentives for disabled workers to stay in the workforce.
The reforms so far have spurred little action. But with the program's bankruptcy looming just a few years off, and with the economy showing no signs of producing a surge in jobs, that indifference to reform may soon have to change.