Did the Great Recession Affect Disability Insurance Receipt?

Time: Tuesday September 25th, 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Ellen Meara (Dartmouth College)

Discussant: Daniel van Vuuren (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: In the U.S., following decades of rising disability caseloads, the Social Security Administration Board of Trustees have predicted that the Social Security Disability Insurance (DI) fund for workers will be exhausted by 2018. This prediction, coupled with a slow recovery from the worst recession in the US since the Great Depression, has deepened fears about the future of the program. However, no systematic evidence describes how or why caseloads have changed during the Great Recession. In this paper, we compare DI applications and awards during the great recession to other recent recessions. We find that changes in the caseload from 2008 to 2010 are not unique compared with other recessions. We then use individual data on older U.S. workers from the Health and Retirement Study to analyze two hypotheses for why DI applications rise during recessions. First, we test whether the number and/or severity of health shocks during recessions can explain elevated DI application rates. Second, we test whether changes in the opportunity costs of applying for DI can explain higher DI application rates during recessions. Although we confirm in the HRS data that DI applications rise with unemployment, we find little support for either hypothesis. We close with a description of those groups most likely to apply for DI during recent recessions and potential alternative explanations for recent trends in DI application rates.

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