Unemployment Insurance and Disability Applications

More than 8.5 million workers are now collecting disability insurance, in other words almost 6% of the labor force is officially disabled. Perhaps not surprisingly, disability applications shot up just as unemployment benefits started to exhaust.

Applications are often denied so disability beneficiaries do not follow applications immediately. Denied applicants, however, often contest and apply again so eventually 50-60% of those who apply will typically enter the disability rolls and start to collect. Far fewer will ever exit the rolls, at least not by way of a job.

Since 1995 the number of disabled workers has doubled and expenditures have increased even faster than disabled workers, tripling since 1995. The increase in workers receiving disability insurance has come at the same time as the US working age population has become healthier. A large fraction of the increase in disability has come from increases in hard-to-verify back pain and mental problems (see Autor and Duggan and more recently Autor).

After the 2001 recession, disability applications also shot up and they never fell back to their old levels. We may be reaching a new, permanently higher, plateau.

Disabled workers do not count as unemployed, they have been bought out of the labor force.

The conservative critique of unemployment insurance used to be that it discouraged people from looking for work. The modern conservative response may be that it encourages people to not become disabled.


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