It’s all about supply and demand, not just demand

The unexpectedly large number of American workers who piled into the Social Security Administration’s disability program during the recession and its aftermath threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues.

Signs of the problem surfaced Friday, in a dismal jobs report that showed U.S. labor force participation rates falling last month to the lowest levels since 1979, the wrong direction for an economy that instead needs new legions of working men and women to drive growth and sustain a baby boomer generation headed to retirement.

Michael Feroli, chief U.S. economist for J.P. Morgan, JPM +0.88% estimates that since the recession, the worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences.

Here is more, from Leslie Scism and Jon Hilsenrath.  And there is this:

Of the nearly nine million former workers receiving federal disability payments, more than 2.5 million are in their 20s, 30s and 40s.

“It is difficult to overstate the role that the SSDI program plays in discouraging” employment among these young people, Messrs. Autor and Duggan said in one of their research papers, urging reform.