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

by on April 8, 2013 at 8:01 am in Economics | Permalink

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.

Bill April 8, 2013 at 8:54 am

Welfare, as we know it, reform in the mid 90′s shifted people from state and other welfare programs to SS disability. State and local governments assisted the unemployable or marginally employable onto the SS disability roles, and others saw, and came.

What this means is that persons earning less that the SS cutoff (what is it now, $110k?) have been picking up welfare costs, and those who earn income above $110k have escaped this welfare realignment.

We should take disability out of SS and put it onto the general fund so everyone contributes, and then begin the process of disability review and redesign to eliminate the incentives to stay on disability. An alternative re funding disability would be to move some general fund money into SS disability, and reform it in that context.

Andrew' April 8, 2013 at 9:56 am

The problem is people who are not disabled on disability. None of this addresses that part, unless you actually believe your disability panels pitch.

anon April 8, 2013 at 10:12 am

h8r

Jack April 8, 2013 at 10:28 am

So JP Morgan’s chief economist thinks 25% of the unemployed are are commiting felony fraud to get a marginal benefit instead of finding employment? Right.

Mogden April 8, 2013 at 10:30 am

He is not right. The number is far larger than 25%.

prior_approval April 8, 2013 at 11:38 am

Well, let’s just try some numbers out -

Rough labor force participation of the cohort 20 to 50 years old – over 80%

Number of adults in the U.S. between 20 and 50 – let’s call it a cool 140 million or so (based on such sources as this http://www.census.gov/prod/2010pubs/p25-1138.pdf )

So, of the roughly 110 ten million working American between their 20s and 40s, a total of less than one percent are considered disabled.

An outrage by any measure. At least in some circles.

Want to take a guess how many people of that cohort participated in mortgage fraud for personal benefit? More or less than the people receiving disability? In other words, 25% or way more?

http://www.bls.gov/emp/ep_table_303.htm

Andrew' April 9, 2013 at 6:23 am

Maybe upwards of 5% by some I’ve heard. But here is the thing: we know there is a HUGE problem with labor participation. We know there is a moderately sized problem with disability. And we know there is a DEFINITE problem with some people not really being disabled, regardless of fraud or a mis-construed system that mislabels and disincentivizes people. So, fix the problem. I don’t have any feelings whatsoever on the people.

Query April 8, 2013 at 3:02 pm

“So JP Morgan’s chief economist thinks 25% of the unemployed are are commiting felony fraud to get a marginal benefit instead of finding employment? Right.”

Stick-up men, drug dealers, and guys who hold up liquor stores have and continue to commit felonies for a relative pittance. Why not do it under legal pretense and the concerned clucking of the intelligentsia for thousands of dollars a year for life?

Jeff April 17, 2013 at 12:03 pm

That’s not what he said or is trying to imply.

If you read it again he’s saying that 25% of those who recieve federal disability payments are in their 20s, 30s and 40s.

I work with someone who’s brother-in-law collects disability because of his hands, yet plays basketball every night…

mph April 8, 2013 at 9:50 pm

Anecdotal — but something I’ve seen a whole lot of lately on the streets of NYC and SF — middle-aged men carrying a cane they aren’t actually in need of.

Dick King April 8, 2013 at 9:59 am

One reason the disability payments come out of the FICA Payroll Taxes is that people who earned more before they became disabled receive more — as they must, if you believe that the purpose is to replace the lost income so that those who they used to support continue to be supported.

The SS system has long been sold as compulsory insurance each person buys for hirself. Without those overriding design features, ir would never have survived this long. If you remove this feature, there would be an outcry that we’ve been baited and switched, and the plan would dissipate.

-dk

Cliff April 8, 2013 at 10:42 am

Two different programs- SSDI behaves as you say. SSI does not require paying in and the benefit level does not change.

Floccina April 10, 2013 at 9:32 am

I have known people on SS disability who worked hard every day. Some worked in cash businesses, one was running a business that he owned and some for in family consumption. I think that a basic income guaranty might work much better and be more fair. You could end a host of programs including SS, food stamps and AFDC and send each adult US citizen a weekly check for $150.

prior_approval April 8, 2013 at 10:02 am

Wow – that is a shocking figure, roughly 800,000 disabled people per decade cohort (20s, 30s, 40s.)

I think we should just return to the glory days of yesteryear, when social Darwinism seemed the best answer to people who just sucked productive society dry with their non-productive existence.

Careless April 8, 2013 at 12:14 pm

I’m confused: does he think that everyone on disability is some sort of racial or ethnic minority, or is he confusing social Darwinism with Darwinism?

prior_approval April 8, 2013 at 1:44 pm

I think you mean ‘they’ –

‘“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.’

Again, using very rough (but at least documented) numbers, less than 1 percent of all (previously) working Americans between their 20s and 40s claim disability. And yet, this less than 1 percent ‘discourages’ employment, according to two authors who sound like they could have made a fine living in 1910 decrying this horrible state of affairs. Back when social Darwinism was considered the most rigorous scientific framework available to solve this problem naturally, using the proper policy tools.

Careless April 8, 2013 at 8:20 pm

Well, it’s clear now. You haven’t the faintest idea what social Darwinism is.

You’re just talking about Darwinism. People who can’t afford to feed their children will have their children starve.

prior_approval April 9, 2013 at 3:19 am

Such an appropropriate user name, Careless.

So, here is a (very simplified, and admittedly narratively formed) beginner’s introduction to social Darwinism –

‘Social Darwinism is an ideology of society that seeks to apply biological concepts of Darwinism or of evolutionary theory to sociology and politics, often with the assumption that conflict between groups in society leads to social progress as superior groups outcompete inferior ones.

The name social Darwinism is a modern name given to the various theories of society that emerged in England and the United States in the 1870s, which, it is alleged, sought to apply biological concepts to sociology and politics.’

And here is where we go into exploring another word not so commonly used anymore -

‘Another of these social interpretations of Darwin’s biological views, later known as eugenics, was put forth by Darwin’s cousin, Francis Galton, in 1865 and 1869. Galton argued that just as physical traits were clearly inherited among generations of people, the same could be said for mental qualities (genius and talent). Galton argued that social morals needed to change so that heredity was a conscious decision in order to avoid both the over-breeding by less fit members of society and the under-breeding of the more fit ones.

In Galton’s view, social institutions such as welfare and insane asylums were allowing inferior humans to survive and reproduce at levels faster than the more “superior” humans in respectable society, and if corrections were not soon taken, society would be awash with “inferiors.” Darwin read his cousin’s work with interest, and devoted sections of Descent of Man to discussion of Galton’s theories. Neither Galton nor Darwin, though, advocated any eugenic policies such as those that would be undertaken in the early 20th century, for government coercion of any form was very much against their political opinions.’

But enough of the beginnings, let’s bring things into the application (in terms that far too many commenters would applaud, especially the last sentence) –

‘Some pre-twentieth century doctrines subsequently described as social Darwinism appear to anticipate state imposed eugenics [4] and the race doctrines of Nazism. Critics have frequently linked evolution, Charles Darwin and social Darwinism with racialism, nationalism, imperialism and eugenics, contending that social Darwinism became one of the pillars of fascism and Nazi ideology, and that the consequences of the application of policies of “survival of the fittest” by Nazi Germany eventually created a very strong backlash against the theory.[38][39]

As mentioned above, social Darwinism has often been linked to nationalism and imperialism.[40] During the age of New Imperialism, the concepts of evolution justified the exploitation of “lesser breeds without the law” by “superior races.”[40] To elitists, strong nations were composed of white people who were successful at expanding their empires, and as such, these strong nations would survive in the struggle for dominance.’

And let’s bring it to the finale, concentrated in the country I live in (whose interest in social Darwinism seems to have been permanently scarred by utter revulsion) –

‘Nazi Germany’s justification for its aggression was regularly promoted in Nazi propaganda films depicting scenes such as beetles fighting in a lab setting to demonstrate the principles of “survival of the fittest” as depicted in Alles Leben ist Kampf (English translation: All Life is Struggle). Hitler often refused to intervene in the promotion of officers and staff members, preferring instead to have them fight amongst themselves to force the “stronger” person to prevail – “strength” referring to those social forces void of virtue or principle.[43]

The argument that Nazi ideology was strongly influenced by social Darwinist ideas is often found in historical and social science literature.[44] For example, the Jewish philosopher and historian Hannah Arendt analysed the historical development from a politically indifferent scientific Darwinism via social Darwinist ethics to racist ideology.’

http://en.wikipedia.org/wiki/Social_Darwinism

I’d include a picture from that regime’s typical ‘educational’ perspective of how an ailing disabled worker was taking food from the mouths of healthy children who could better serve the state, but this is a text only forum.

Careless April 9, 2013 at 11:36 am

Yes, and somehow after reading that, you still don’t know what “social Darwinism” is and are confusing it with plain old Darwinism.

Careless April 9, 2013 at 11:40 am

10 second class lesson: if the unproductive classes are starving, that’s Darwinism. If “the unproductive classes” is code for something else, that’s social Darwinism

Sean C. April 8, 2013 at 10:04 am

For a very thorough and well researched report on this topic, see the This American Life episode from a couple of weeks ago:
http://www.thisamericanlife.org/radio-archives/episode/490/trends-with-benefits

For a shorter version, the same reporting team hit the high points on Planet Money:
http://www.npr.org/blogs/money/2013/03/22/175076784/episode-446-the-invisible-14-million

Emily April 8, 2013 at 10:39 am

There have been a lot of criticisms of that, some more valid than others, but the one I find the most compelling is that working and being on disability aren’t as in opposition as the original story said. (They’ve changed the text that used to read “But going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work,” but they haven’t really explained why.) You can work on disability. If you exceed the income limits, your disability gets cut – but if your work income goes back down within five years of that cut to under the limits again, your benefits are automatically reinstated without you having to apply for them again. This is a result of the 1999 SSDI reform “Ticket to Work.”

zbicyclist April 8, 2013 at 1:50 pm

” If you exceed the income limits, your disability gets cut”

I wonder what the effective marginal rate is (allowing for disability cuts, taxes, and perhaps other effects).

Emily April 8, 2013 at 3:17 pm

Good question. There is a proposal that has been discussed that would create a phase-out equal to a 50% effective marginal tax rate, so I’m going to guess the current one is higher than that, at least within some range. I don’t know how taxes are handled.

Sue April 8, 2013 at 11:09 am

thanks for posting these links, I found the story interesting – particularly the incentives that influence the behavior of states.

anon April 8, 2013 at 10:11 am

Well, at least we’re only getting a larger bureaucracy as a bonus, not any lousy infrastructure.

http://marginalrevolution.com/marginalrevolution/2013/04/good-sentences-about-china.html

Max April 8, 2013 at 10:19 am

I still don’t see how this makes it a supply issue. If the unemployment rate is high even as these malingerers are dropping out of the labor force, doesn’t that suggest an even BIGGER demand problem?

commentariette April 8, 2013 at 10:36 am

I wonder how much of this is a genuine increase in disability, especially among younger/middle-age people?

Some of it almost certainly has to be: Medical science has gotten hugely better at treating e.g. premature babies, trauma victims, people with cerebral palsy, epilepsy, multiple sclerosis, muscular dystrophy, down’s syndrome, some kinds of cancer, etc.

That’s awesome. But it’s also likely to increase the number of people who are now able to survive and have some quality of life, but aren’t able to work.

Emily April 8, 2013 at 1:15 pm

A way to start looking at this would be to find the data on categories of disability over time, preferably broken down by age group. You can probably find that.

mulp April 8, 2013 at 1:35 pm

What is a “disability” without the context of a job?

Is a missing leg a disability (or cerebral palsy, epilepsy, multiple sclerosis, muscular dystrophy) in the workplace of a computer programmer?

Is a missing leg not a disability in a factory job requiring walking from station to station moving a 20 pound part all day?

If a computer programmer with a history of earning $200K with cerebral palsy, epilepsy, multiple sclerosis, muscular dystrophy applies for SSDI, he will be turned down as not meeting the criteria of disabled. ADA compliance will keep him gainfully employed.

Cicero April 8, 2013 at 10:57 am

Although it is likely that a lot of people going on disability are committing fraud no one here seems to be considering the fact that the massive layoffs of the past several years has resulted in a huge increase in the workloads of those corporate workers left in their jobs. I can tell you that the total amount of work has actually increased and now it has to be shared with fewer workers. This is especially true in high tech. Is it inconceivable that long hours and stress are contributing to true physical and psychological problems driving SOME people into short-term leaves?

mulp April 8, 2013 at 1:26 pm

Why isn’t it the employers who are committing fraud?

Under ADA, employers are required to provide accommodations to workers for their disabilities. Firing a worker based on their performance because the employer failed to provide accommodations for the worker’s limitation is fraud – the worker is fired because they are disabled. And the disability might be hearing loss from working in the noisy factory which causes them to ignore spoken commands outside of a direct face to face interaction – the accommodations are simple, but why bother when the worker can be fired and replaced for less? Proving the firing is for being “disabled” is near impossible because there is no definition of “disabled”, only of disability and that is contextual. Proving “insubordination” is code for “deaf” is hard without observing the workplace interactions in context.

mike April 8, 2013 at 2:40 pm

“Firing a worker based on their performance because the employer failed to provide accommodations for the worker’s limitation is fraud – the worker is fired because they are disabled.”

No, that’s not fraud.

mw April 8, 2013 at 11:01 am

Someone needs to turn off this tap–or at least redirect it to join the torrents and rivers flowing down the banking hole. True, it will only be a minor tributary at best, but still worth fighting for.

mulp April 8, 2013 at 11:02 am

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

Actually, I’m pretty sure most are not “former workers”.

What frustrates me most is the idea that Social Security is a retirement program.

It is a lifetime Federal anti-poverty program. Half of those getting Social Security benefits are NOT retired workers. Half are either disabled or dependent beneficiaries, and while some have worked, dependents are not living off their work benefits, notably spouses who worked intermittently or part-time caring for family members, generally children, but also parents and other family.

The addition of disability benefits recognized that our society can not seem to accommodate the disabled like was done in the past by having the disabled tend the chickens or similar tasks under the watch of other workers. Today, even the lowest wage jobs require a high functioning adult worker. Thus disabled children gain benefits as dependents and do not age out as Paul Ryan did, a beneficiary who was not a “former worker.”

I would also not, many getting Social Security benefits work, many because they need the income, but they can’t possibly earn enough to live without those benefits, even in a 90s economy, and that has not existed in the 21st century. Maybe in a 50s or 60s economy…

Andrew' April 8, 2013 at 11:15 am

Again, the issue is people who are not disabled getting disability. I’m not sure why this doesn’t make people who support disability payments angrier. We should make it so that it does.

mulp April 8, 2013 at 12:22 pm

Define “disability”.

For SSDI, disability is determined based on not being able to be employed at gainful employment.

You can argue Stephen Hawking is gainfully employed, thus not one person can be deemed disabled, and anyone like him can easily get a job at McDonalds taking orders.

In fact, the ADA requires McDonalds to provide reasonable accommodations for the disabled, so if you are like Hawking you can apply for a job at McDs, sue when they refuse to hire you but hire anyone else, then sue to have then provide the custom computer software and physical changes to allow you and your computer to work in the store taking orders, and require them to provide a personal assistant for your needs.

Right??

How about a person with a stroke who has trouble speaking clearly?

Or someone who is deaf?

The ADA must require employers to make accommodations for these workers, by eliminating extraneous noise that might interfere with communication, and slow the pace of work to fit the worker. Right?

Imagine you woke up deaf tomorrow? (Just hear a discussion of advances in hearing aids which mentioned a orchestra conductor who just woke one morning totally deaf in one ear and seriously impaired in the other, so this is something that happens.) Would you be disabled? If you write code for a living with few spoken conversations, you would not be disabled, but if the only job you could get was making phone calls, you would be disabled.

If the best job you qualify for is taking orders at McDs, losing your hearing isn’t going to qualify you as a computer programmer, and if you could be readily trained to be gainfully employed as a programmer, why are you working at McDs taking orders?

As a doctor explained, one of the questions he asks to determine disability eligibility is “what is your highest grade of education?” – obviously a secondary school dropout is not likely to get an office job where lifting or standing etc is not required if they have been working at manual jobs since.

Hazel Meade April 8, 2013 at 11:20 am

http://www.disabilitysecrets.com/retired-draw-disability.html

You can’t receive Social Security retirement benefits and disability benefits at the same time (with one small exception, which we’ll discuss below). The Social Security disability program exists to provide disability benefits to those who are unable to work as a result of their conditions and who are too young to draw their retirement benefits. In this sense, Social Security disability insurance (SSDI) can be thought of as a retirement benefit for those who are forced to retire early. If you do collect SSDI disability benefits, they will be converted to retirement benefits when you reach full retirement age.

In addition, when you reach full retirement age, you would get your full retirement benefit, as if you had never opted to collect early retirement payments. Heer’s an example of switching from early retirement to disability.

In other words, being declared disabled is a way to retire early and collect SS at 62, while still getting your full retirement benefit at 70.

Dangerman April 8, 2013 at 12:06 pm

Considering how much work goes into optimizing SS retirement benefits (see Laurence Kotlikoff and Scott Burns), this is a HECK of a loophole.

Thank you for pointing that out.

prior_approval April 8, 2013 at 12:10 pm

And just think how easily the disabled can have their IRA matched – oh wait.

Hazel Meade April 8, 2013 at 2:23 pm

So you have your IRA matched until you become “disabled” at 55 due to your bad back. You collect SS disability from there until you hit 62, where you begin collecting your FULL (not reduced) retirement benefit and begin drawing from your IRA.

Hazel Meade April 8, 2013 at 2:28 pm

I may have the ages wrong when you can collect what level of benefits. But the point is, if you get on disability a few years before you retire, you can take early retirement benefits without reducing your full employment benefit later.
So, my guess is that a lot of boomers are gaming the system by getting themselves declared “disabled” due to joint pain or whatever, a few years before retirement, and then using that as a means to effectively retire early without losing their full SS benefits.

prior_approval April 8, 2013 at 2:41 pm

‘So, my guess is that a lot of boomers are gaming the system by getting themselves declared “disabled” due to joint pain or whatever, a few years before retirement, and then using that as a means to effectively retire early without losing their full SS benefits.’

Fair enough – but the posted information talks about the distinctly younger than baby boomer aged.

As for loopholes – there used to be this thing called triple dipping, which was a big thing in the DC area decades ago, at least among those who had served in the military, retired, worked in private industry or as a government employee, retired. then collected SS – along with their military pension, and their private/government pension.

That was a loophole.

Hazel Meade April 8, 2013 at 3:46 pm

Yeah, saying “of the 9 million 2.5 million are in their 20s, 30s, and 40s” means that 6.5 million are in thier 50s or 60s.
So, in other words, the VAST MAJORITY of people on disability are in their 50s and 60s.
It would be interesting to see some numbers on what percentage of the new signups in the past 10 years are people who transitioned from welfare vs. people who developed some mysterious medical problem in their late 50s.

Michael Sankowski April 9, 2013 at 8:52 pm

I do not think anyone in this comments section knows more than one person on disability. The people I know on disability are all unable to work at anything but the simplest jobs.

mulp April 8, 2013 at 11:33 am

‘ ‘ “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. ‘ ‘

Well, Messrs. Autor and Duggan seem to do a great job of grossly overstating the role of SSDI in discouraging employment.

I challenge these two to live on the average monthly income of $1,129.81. Granted it does include Medicare coverage and most likely SSI to pay the Medicare premiums, because contrary to the presentation of many, Medicare is not free to the “retiree” but typically costs $250 a month.

How many jobs are located within the distance of home of a worker with no car and no means of travel but walking, maybe biking, or bus. How many jobs are done at home? Or can be adapted on schedules of the worker who might suffer pain, or not be able to get to work because of weather?

And by the way, work is allowed at the same negative income tax rate range as Milton Friedman proposed. Work is rewarded on SSDI far more than on welfare in all the States where one might imagine living on $1130 a month where more than $25 a week in earnings cuts welfare benefits by more than a $1 for every dollar earned.

But perhaps the key is the lack of Medicare for all – the biggest cost of leaving SSDI+SSI will be losing Medicare and being thrown into the uninsurable category, at an income level that denies Medicaid in the parts of the US where an income of $1130 a month might be viable.

This is thus an argument for universal health care coverage in a “European welfare state socialized medicine” fashion, and no two of the 17 EU members have the same universal health care system.

bjssp April 8, 2013 at 12:35 pm

Leave aside how easy it is to live on a certain amount of money for a moment. As I understand it, a lot of the expansion in this stuff was predicted in 1995 and the numbers we are seeing now are not all that dramatically larger than what was predicted. See this Kevin Drum post for more: http://www.motherjones.com/kevin-drum/2013/04/do-disability-payments-explain-why-people-are-leaving-labor-force

So, assuming I am not mixing up something very basic here, something doesn’t add up. Perhaps Autor, et al are right and that it’s a disincentive to work for young(er) people, but if so, wouldn’t the roll have shot up by more than roughly 700,000 people?

charlie April 8, 2013 at 1:07 pm

1,129.81 plus whatever you can get from petty crime.

I’d say one iphone a month (100), maybe 2 GPS units (50 each?), shoplifting (easily over 200 a month).

prior_approval April 8, 2013 at 1:51 pm

‘I’d say one iphone a month (100), maybe 2 GPS units (50 each?), shoplifting (easily over 200 a month).’

Chump change – look at what Mozilo took in for extensive major fraud.

‘Mozilo’s compensation during the United States housing bubble of 2001–06 has come under scrutiny. During that period, his total compensation (including salary, bonuses, options and restricted stock) approached $470 million.[7]

His compensation also includes payment of his annual country club dues at Sherwood Country Club in Thousand Oaks, CA, The Quarry at La Quinta golf club in La Quinta, CA and Robert Trent Jones Golf Club in Gainesville, VA.

————————————–

On Friday October 15, 2010, Mozilo reached a settlement with Securities and Exchange Commission, over securities fraud and insider trading charges. Mozilo agreed to pay $67.5 million in fines and accepted a lifetime ban from serving as an officer or director of any public company; it is the largest settlement by an individual or executive connected to the 2008 housing collapse. Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement that “Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite.” By settling the SEC charges, Mozilo will avoid a trial that could have provided fodder for future criminal charges. [21][22]

This fine represents a small fraction of Mozilo’s estimated net worth of $600 million. Countrywide will pay $20 million of the $67.5 million penalty because of an indemnification agreement that was part of Mozillo’s employment contract. The terms of the settlement allow Mr. Mozilo to avoid acknowledging any wrongdoing.

In February 2011, the U.S. dropped its criminal investigation into the facts behind that civil settlement.’ http://en.wikipedia.org/wiki/Angelo_Mozilo#Compensation

However, to his credit, Mozilo never claimed any disability, even in the area of ethics.

Michael April 8, 2013 at 1:53 pm

The authors seem to be implying that there are many people out there who are thinking, “How can I eat while doing the minimal amount of work?” I’d wager that most of them are likely just asking, “How can I eat?”

The fact that SSDI shoots up when the ratio of unemployed to new job openings changes suggests a lack of job openings plays a big role. When you have 1 opening for every 20 unemployed people, 19 aren’t going to find work. They tend to still need money to survive. Some may exploit the existing safety net system to do so, but one can’t claim, without justification, that they wouldn’t prefer a job, and would indeed work, if the number of job openings matched the number of unemployed.

bjssp April 8, 2013 at 2:07 pm

Well, sure, but what about the Kevin Drum link I posted above? Unless I am misreading this stuff, it seems like there’s a chunk of people that are using this program in the manner you said but, considering the scale of the problem, not that many. So, are Autor, et al unaware of how this country is aging? That seems unlikely, so is the program not as big of a discincentive as they think? That seems more likely.

If it’s neither of those things, what, then?

The Anti-Gnostic April 9, 2013 at 2:31 pm

The authors seem to be implying that there are many people out there who are thinking, “How can I eat while doing the minimal amount of work?” I’d wager that most of them are likely just asking, “How can I eat?”

How many HHS and SSA offices have you been in? How many Walmarts and courthouses have you been in? The poor are OBESE.. Expensive diabetics gobbling up way more calories than they burn.

Everybody really would be better off if they were just given some land and a mule. There are plenty of low density areas like Bethesda, Maryland and Malibu, California where this could be done.

derek April 8, 2013 at 11:34 am

Its all fine until taxpayers are called upon to actually pay for this stuff.

Brian Donohue April 8, 2013 at 11:49 am

Yeah, this is a minor theme in the vast finances of Social Security- feels like a good place to ‘hide’ unemployment. It’s like water seeking its own level or something.

bjssp April 8, 2013 at 12:36 pm

The cost of these benefits is, I think, quite secondary to the fact that lots of people who would otherwise like to be working can’t find suitable employment. Over the long term, that’s likely to be much more damaging to us and to them.

liberalarts April 8, 2013 at 11:43 am

Just last month MR reported (an Alex post) that states have been aggressively pushing people off of their roles by assisting them in the transition to SSDI with the aid of consulting firms. This seems like a good post to look back at:
http://marginalrevolution.com/marginalrevolution/2013/03/from-state-welfare-to-federal-disability.html

prior_approval April 8, 2013 at 12:11 pm

Stop that – no messing with the narrative flow by using facts.

Edward Lambert April 8, 2013 at 1:22 pm

If you want to see the dynamics of how labor becomes marginalized like this… here is the link… posted today.

http://effectivedemand.typepad.com/ed/2013/04/what-non-inclusive-growth-looks-like.html

bjssp April 8, 2013 at 2:12 pm
JohnC April 8, 2013 at 2:30 pm

The Fed should be paying every US adult $1000 per month with no strings attached. We have a demand problem. The economy doesn’t need more workers. Even Hayek supported a universal basic
income.

Thanks to globalization and automation, we are living in a post inflation economy. We should not be afraid to run deficits provided the economy is growing strongly. A universal basic income is the solution. Labor participation rates have much further to fall as robotics and AI advances start to roll out.

Don’t be too hasty in judging the unemployed. You could be joining them soon.

somaguy April 8, 2013 at 3:43 pm

Next you’ll be telling is that communism was a good idea, just ahead of its time.

Capitalism and a labor-free economy make for an interesting society.

JohnC April 8, 2013 at 4:07 pm

Hayek was not a communist. Capitalism is most efficient with fewer workers. Think of mechanized farming versus peasants working fields by hand.

The US government is already supporting a large percentage
of the population. Ironically, the young entrepreneurs who could use a basic income to start a business are not eligible to claim any benefits. The current system is anti-capitalist in my opinion. It drives the young into the military and government funded colleges. I’d rather see a basic income than taxpayer funding go to college football coaches for example.

uffy April 8, 2013 at 7:32 pm

You are absolutely correct about the current system being anti-capitalist, but I am fairly certain sports programs pay for themselves via TV deals and such.

JohnC April 9, 2013 at 3:13 am

I thought the sports programs paid for themselves, but unfortunately I was wrong. See the example below:
https://blogs.law.harvard.edu/philg/2012/09/17/california-taxpayers-buy-a-474-million-college-football-stadium/
The highest paid public sector workers in California are the college football coaches. Many of them are earning $1 million+.

mike April 8, 2013 at 2:50 pm

“We should not be afraid to run deficits provided the economy is growing strongly.”

In your estimation, is the economy growing strongly?

Query April 8, 2013 at 2:56 pm

To be terribly blunt about it, how much of this derives from our society’s inability to call a bum a bum?

The numbers can be spun all sorts of ways, but when disability claims track the rise in unemployment rates, it’s difficult to see that excess as anything other than people deciding that living off of their fellow citizens is less cumbersome than looking for work. If you are truly a disabled person–the sort of person we ought to be assisting–how can you be not-disabled when the economy is good and suddenly-now-disabled when the economy is bad?

If your basis for claiming other people’s money is a medical one, how does that have anything to do with the overall state of the economy?

We have more and better medical treatment than in previous decades, as well as statutory protections and accommodation for disabled workers. How does it follow then that we have more people too disabled to work rather than fewer?

KLO April 8, 2013 at 3:18 pm

I could reverse this and ask how does the state of the economy affect one’s being a bum. When work was readily available all of these bums were willing to work. Now that work is less rewarding and, perhaps, largely unvailable, these people are bums. It seems to me that the problem is as much caused by the availability of work as it is the willingness of people to work.

bjssp April 8, 2013 at 4:42 pm

Who’s to say these people aren’t willing to work? It’s not as if this benefit alone is some huge windfall and is given out so easily. Nor is the economy operating at full capacity.

bjssp April 8, 2013 at 4:47 pm

So, after emailing a liberal economist, I got my misconception straightened out. It seems as though, after adjusting for age, Autor is saying there’s been a 10-15 percent rise.

Whether or not this is defensible based on one’s ideology, is this really some sort of surprise, given the alternatives some face?

Steve Sailer April 8, 2013 at 5:36 pm

Thank goodness we let in all those illegal immigrants to do the jobs Americans are just too disabled these days to do. Who knew that working class Americans would suffer an epidemic of vague back pain after decades of business, political, and economist elites conspiring to hammer down working class wages?

Willitts April 8, 2013 at 10:45 pm

Although I heartily support gay marriage, imagine the hit to government obligations when millions of people are suddenly added to entitlement rolls.

It’s not their marriages that are the problem. The problem is the benefit structure and the programs themselves. Let’s privatize this mess before there are too many beneficiaries to make it infeasible. Ban the defined benefits pension and anything that looks like it.

bjssp April 8, 2013 at 11:29 pm

So you want to ban the ability of a company to enter into a contract with its workers?

DK April 8, 2013 at 11:08 pm

The unexpectedly large number of American workers
Really? How come no one is fired?

Floccina April 10, 2013 at 9:21 am

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

He was trying to sound as sensational as possible. He should have said:

Of the nearly nine million former workers receiving federal disability payments, more than 2.5 million are under 50 years old.

marmico April 10, 2013 at 1:01 pm

Did Cowen finally read the memo from the Mercatus Center? We’re hammering the SSDI program, get on board.

During the Bush43 expansion from 2003-2007, the SSDI total awards were 4.04 million and the labor force participation rate (LFPR) declined from 66.3% to 66.0%. During the Bush43/Obama recession, Obama recovery and expansion from 2008-2012, the SSDI total awards were 4.91 million and the LFPR declined from 66.0% to 63.5%.

Feroli is puzzled due to innumeracy.

Comments on this entry are closed.

Previous post:

Next post: