Conservatives have long complained that an inordinately high participation in disability programs indicates that the programs are being abused. They advocate policing the rolls and making certain that able-bodied people are not abusing the system.
There is new evidence that they are right about the diagnosis — and yet shortsighted when it comes to the cure.
The employed share of the population 25 to 54 years old — the age range economists generally consider a person’s prime working years — is still almost a full percentage point below where it was on the eve of the Great Recession, and more than two percentage points below where it was before the 2001 recession.
One factor was a steady increase in the number of people not participating in the labor force because of health problems or a disability. In 1994, the Bureau of Labor Statistics determined that 4 percent of Americans 25 to 54 were not seeking work because of those reasons. By mid-2014, the number had risen to almost 6 percent of that age group. …
But then it began to fall: slowly at first and then, beginning in 2016, faster. Over all, the number of prime-age people who cite disability as their reason for not working has shrunk by 7 percent since mid-2014.
We almost certainly didn’t have an outbreak of disabling injuries and illnesses followed by a wave of remission. Far more likely, people were resorting to disability programs when jobs were scarce, or when they lacked the skills to transition from one job to another. It is noteworthy that the spike in disability did not occur in other countries where the benefit system for unemployed workers is different.
The data have some interesting implications for the economy and policymakers.
First, there may be significant “slack” in the job market. The bad news is that, with more workers deciding to reenter the job market, wage growth may continue to stagnate. The good news is that we are not in danger of triggering high inflation anytime soon (unless our excessive debt and trade policies force up borrowing costs and consumer prices). Moreover, with more people working, we will get higher gross domestic product, higher household income and more tax revenue.
Second, we need to rework our social safety net so that people do not resort to riding out recessions on disability. We want as many people who can work, even if only part time, to do so. Part, but only part, of the solution is making sure that people are not abusing the system. A bigger challenge, however, is incentivizing people who really are capable of working not to go onto disability rolls in the first place. This, in turn, points to serious flaws in our unemployment benefit and worker training systems as well as in the tax code.
To encourage work, for example, Michael R. Strain of the American Enterprise Institute advocates that we “rethink the way unemployment benefits are provided and allow workers interested in moving in search of employment to receive relocation assistance in place of continued unemployment benefits.”
We should also look to expand the earned-income tax credit. (“Reforms of the Earned Income Tax Credit are also essential to making work more attractive,” says Strain. “The EITC is one of the most successful anti-poverty and pro-work programs we have. It functions as an earnings subsidy for low-income households. In order to qualify for the refundable tax credit, you have to have a job, and the size of the credit increases with earnings over a sizeable range.”) Strain argues, “Expanding the EITC for workers with children in the 1990s brought a lot of single mothers into the workforce. We should expand the EITC for childless workers in order to do the same for them.”
The center-left group Third Way has an interesting idea to promote work for older Americans who might otherwise retire early. (It would work well for those resorting to disability as well.) It recommends:
A half-century ago, John F. Kennedy launched the Peace Corps and called on the Baby Boomers to serve America abroad. The Boomer Corps would re-enlist one million Boomers to serve, this time in their communities and working with young people.
Instead of fully clocking out of the workforce, Boomers will have the opportunity to transition to a fulfilling, part-time job in national service. They would be directed toward helping families raise healthy, well-educated kids through childcare, early childhood education, after-school care, teaching, tutoring, skills training, mentoring, and coaching.
Corps members would earn a respectable wage—entirely tax-free. Seniors in the Boomer Corps program would work 20 hours per week and receive a stipend of $12,000 a year. These would not be optional volunteer activities, but rather jobs with schedules and a weekly time commitment. You have to apply, be vetted, and—depending on the role—be trained or certified. States would operate the programs, but they would benefit from a 3:1 federal match to pay corps members’ salaries. At an annual cost of $9 billion to the federal government, Boomer Corps would be a high-return investment.
And it might even help reduce isolation, alienation, polarization and social divisiveness.
In short, it is a very good sign that the disability rolls are shrinking and more people are participating in the economy. However, it also points to a need to reform disability benefits and provide extra help keeping people in the workforce. Whether it is relocation benefits, subsidized wages, a streamlined worker training system or the abolition of onerous non-safety-related licensing requirements that keep people out of good-paying jobs, we should aim to reduce disability rolls even further and keep them at a reasonable and sustainable level for those who are truly disabled. If conservatives truly believe in work, they should also consider — gasp! — effective support for child care. If work is that important, it’s worth paying for child care to free up parents to work.
Left and right, at least on this topic, should be largely in agreement that working is preferable to receiving unemployment benefits.
