As it has been noted many times, the employment participation rate has dropped to abnormally low levels. Earlier this year we discovered nearly 1 in 20 working age Americans is now on disability, a doubling since 1990. Over the past 2 years nearly 1M Americans have joined the disabled ranks, explaining part of the huge drop in the participation rate.
A new study out shows fascinating behavior among the 50 to 65 age group. Those who have been on long term unemployment assistance, show a massive herding to disability towards the very end of their unemployment benefits eligibility.
WSJ RealTime Economics blog reports:
- Many poor Americans seek Social Security disability payments as a financial life preserver when their unemployment benefits begin expiring, preliminary research by two economists shows. The findings, released by the Obama administration Thursday, are based on interviews with unemployed workers for a study conducted by White House Council of Economic Advisers Director Alan Krueger and Andreas Mueller of Columbia Business School.
- The findings offer a new window both into the struggles of the poor and the growing financial strain of one of the country’s largest entitlement programs.
- Their research found that close to 10% of Americans between the ages of 50 and 65 who didn’t have access to at least $5,000 applied for Social Security disability benefits by the time their unemployment benefits were set to expire.
- The percent of this group seeking the benefits rose precipitously in the weeks leading up to the exhaustion of benefits, as it was below 1% with 50 weeks left in unemployment benefits. (fascinating) Jobless Americans in this age range who had access to at least $5,000 were much less likely to seek SSDI benefits at any point while collecting unemployment benefits.
- There has long been a relationship between unemployment rates and applications for disability benefits, with more Americans seeking entry into the program when it’s harder to find a job.
- The Social Security Disability Insurance program was created during the 1950s as a way to care for those who can no longer work because of illness or injury. It has transformed in recent decades, growing to pay $130 billion in benefits to 10.6 million workers this year. It is projected to exhaust its reserves by 2017 if changes to the program aren’t made. Americans awarded SSDI benefits receive a monthly payment as well as access to Medicare coverage.
This will be another bailout in the future as the growth curve is showing 'hockey stick' proportion.
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