The Falling Disability Rolls

Faster growth and less fraud draw more people into the workforce

WSJ editorial. Excerpt: 

"Conservatives have tried to push entitlement reform up Capitol Hill too many times to count. But failure isn’t inevitable, and last week’s annual Social Security and Medicare trust fund report shows that a faster-growing economy and administrative reforms are shrinking long-term disability payments.

While Social Security reserves are still projected to run dry in 2034, actuaries have extended the doomsday clock for the disability fund by 20 years to 2052. Disability applications have been falling since 2010 as the economy has improved. The growth in beneficiaries that started in 1983 also started to reverse in 2014 when the Social Security Administration (SSA) tightened benefit reviews to reduce rampant fraud.

As the SSA notes, “applications and award rates are both near historic low levels.” Since 2014 the number of disabled workers receiving benefits has declined by 260,000. This retrenchment may seem paltry, but by our calculations it has saved the disability trust fund about $3.7 billion this year.

The main reason for the decline is that better economic opportunities have attracted workers who had filed for disability after losing jobs. According to the Bureau of Labor Statistics, the number of disabled in the workforce hit a trough of 4.5 million in January 2014 but has since grown by 1.5 million. The labor-force participation rate for disabled working-age men has climbed to 38% from 30%. This suggests that for many Americans disability had become another form of unemployment insurance.

Notably, the modest increase in the national labor-force participation rate over the past several years has been driven mostly by the uptick among disabled workers. Amid a tightening labor market, employers have needed to become more accommodating of disabled workers and have also had to raise wages, which increases the incentive to return to the labor force."