The recently increased unemployment numbers, as bad as they are, may actually be significantly worse than reported.
According to a number of studies, the use-or abuse– of Social Security Disability Insurance (SSDI) may mask a large number of individuals who would otherwise be among those who are counted as out of work. According to a study reported in Forbes,www.forbes.com/sites/adamhortung/2012/08/22/is-disability-the-new-unemployment-insurance/, there is now one individual collecting disability for every twelve in the workforce.
The Social Security Disability Insurance program, established in the 1950s, was intended to provide support and medical care for those incapable of working due to injury or disease.
According to figures released by the Social Security Administration, 8,827,795 people were receiving SSDI in 2012. www.ssa.gov/oact/STATSdibStat.html, a significant increase over the 7,427,203 in 2008, the year before the current administration took office. The government spent $132 billion on the program in 2011, over twice as much as it did just about a decade ago.
The relationship between the devastated U.S. economy and the rise in disability claims is not coincidental. According to the Business Insider publication, “Since mid-2010, precisely the time millions of U.S. citizens used up all of their 99 weeks of unemployment insurance, disability claims have risen by 2.2 million. Those on disability are not counted in the workforce and are not considered unemployed.”
In recent times, many applicants are thought to have manageable, rather than truly disabling, medical or injury issues. David Autor, an MIT economics professor, described SSDI as “our big welfare program” In a Wall Street Journal interview.
The number of applicants to SSDI has grown even though data from the Bureau of Labor Statistics indicates that the American workplace is getting safer all the time (according to Forbes, there were, in 2010, 3.5 total recordable cases of non-fatal occupational injury and illness per 100 full-time workers, down from 5.0 less than a decade ago, and 11 per 100 in 1973, a net decline of 3.7 percent every year for four decades. Additionally, the American workplace is increasingly becoming a low-hazard white collar environment.)
A Business Insider review noted that over 99% of all SSDI beneficiaries remain in the program until retirement age.
The rise in SSDI beneficiaries also clears up another mystery, according to the National Center for Policy Analysis. “The population is growing, yet the work force is shrinking. In 2000, the civilian labor force participation rate peaked at more than 67%. In may [of 2012] it stands at 63.8 percent…Social Security Disability claims may be having an impact…Since the beginning of 2009, more than 5 million people have applied for social security disability. About one and one-half million have started receiving benefits. In 1980, about 2.8 million workers were receiving disability, along with about 1.8 million of their dependents. By 2010, those numbers had increased to 8.2 million workers and 2.1 million dependents (not including adult disabled children.). To put this in context, in 1980 about 3% of the working age population (ages 18 to 65) received disability payments. In 2010, more than 5 percent of the working age population received disability payments.”
Investors.com news.investors.com/business/ notes that “since the recession ended in June of 2009, the number of new enrollees to the Social Security Disability program is twice the job growth figure. …the big factor in the recent surge is the slow pace of the economic recovery…the number of applicants was up 24% compared with 2008.”
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Even when the employment picture improves, some states have noticed continuously climbing SSDI applications.
This confirms a recent study by Baruch College’s Na Yin.Paa2013.princeton.edu/papers/132786 Yin writes that in economic downturns, those with health limitations who would find jobs may skip both searching for work and applying for unemployment benefits and instead apply for disability programs. Yin points out that this has four detrimental effects: First, it increases the administrative costs of screening due to the larger number of applicants; second, it may increase the probability of errors in screening as the new pool of applicants would contain more able applicants resulting in both denying legitimate claims due to the administrative burden, as well as accepting able applicants into the program; third, it may affect job prospects of applicants negatively if/when they are denied disability insurance as they have stopped searching for new jobs and perhaps reduce their investments in their own human capital; and finally, longer average years receiving disability considering the low rates of termination of benefits due to health recovery or income from work above the SGA level.
The problem was noted by the White House in a December 2011 report on “unemployment Insurance Extensions and Reforms in the American Jobs Act”www.whitehouse.gov/sites/default/files/ui_report_final_121511.pdf , which reports:
“An important potential avenue for leaving the labor force, especially for older job seekers, is to apply for disability benefits through the Social Security Disability Insurance (SSDI) program. SSDI applications generally rise when unemployment is high. Unemployed workers with significant or persistent illnesses or injury can qualify for SSDI despite the fact that some applicants would continue to work if they still had a job. According to recent research, the average SSDI enrolle stays in the program for many years and ultimately receives benefits of over $240,000 (Autor & Dugan 2006). Workers on SSDI rarely return to the labor force, resulting in a loss to society of the economic contribution those workers would have made…(Krueger and Mueller) find that applications for SSDI by unemployed workers older than age 50 increase as these workers get close to exhausting their unemployment benefits.”
An analysis by the Brookings Institutewww.brookings.edu/research/articles/2012/07/longterm-unemployment-burtless , echoing the White House summary, both illustrates the issue and illuminates why it is becoming an increasingly difficult issue. Gary Burtless, the study’s author, describes SSDI as an “option” for middle-aged and older workers. He notes that “disability is a fuzzy legal concept. Large numbers of jobless workers manage to meet the legal standard when work prospects are poor to nil…Sadly, once workers are enrolled in the SSDI program, few ever return to work.”
The “fuzzy legal concept” of disability is described by the Organization for Economic Cooperation and Development http://www.oecd.org/washington/: notes that mental disorders such as depression and anxiety have increased by more than three times from the 10% of awards thirty years ago to thirty-three percent currently. Emphasized that “less stringent screening procedures, more attractive benefits and a waning need for less-skilled workers have bolstered SSDI claims.”
Another worrisome phenomenon associated with SSDI is the practice of “double dipping,” recently described in a Fiscal Times www.thefiscaltimes.com/articles/2012/09/12/117000-Americans-get-jobless-and-disability-benefits.aspx.tp=1 article, which noted that 117,000 Americans get both unemployment and disability benefits.
The long range effect of increasing numbers of SSDI assistance is going to be particularly dire. Business Insider notes that at current growth rates, 7% of the adult population could be receiving benefits by 2018.
The system is headed towards bankruptcy just five years from now, according to the Social Security Administration www.ssa.gov/oact/trsum/index.html