Interesting article in Zero Hedge today.Link.
It seems roughly a quarter of the people whose unemployment benefits expire move on to disability payments. They are no longer counted as unemployed which results in a drop in the unemployment rate, but they continue receiving benefits.
Excerpts below.
But how does one survive after losing the unemployment benefits? Clearly people struggle. One way to pay the bills however is to file for and receive the federal disability benefits - assuming of course one has a disability. Interestingly enough, the Great Recession and the slow recovery somehow generated many more disability recipients.
JPMorgan: As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labor force— currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began.
The Sober report then goes on to look at the makeup and maladies of those going on disability:
JPMorgan points out that increases in the number of disability benefits recipients account for about a quarter of the decline in employment participation. Furthermore during recessions the number of new disability claims actually increases, even though the number of jobs with higher injury incidence (such as construction) generally declines. Try explaining that one... Half of the benefit recipients suffer from "mental disorders" and "musculoskeletal disorders" (such as back pain). "Mood disorders" alone account for over 10% of this group. And once someone starts receiving these benefits, it's almost impossible to take the off the program. In 2011 only 1% of the recipients lost their benefits because they were no longer deemed disabled. So how much is this program costing the US taxpayer? Apparently quite a bit.
JPMorgan: The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.
Thus a quarter of people who drop out of the workforce and come off the unemployment benefits, simply move to receiving disability payments. And most stay there until they roll into the social security program when they retire - from their disability. The same source, a different program.
Autor attributes disability's expansion mainly to liberalized, more subjective eligibility rules and to a deteriorating job market for less-educated workers. Through the 1970s, strokes, heart attacks and cancer were major causes. Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981's 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up.
For many recipients, the disability program is a form of long-term unemployment insurance, argue Autor and his frequent collaborator Mark Duggan of the University of Pennsylvania. Benefit applications surge when joblessness rises. From 2001 to 2010, annual applications jumped 123 percent to 2.9 million. On average, recipients start receiving payments at age 49 and keep them until 66, when they switch to Social Security's retiree benefits.
Superficially, the case for overhaul seems overwhelming. Tougher eligibility standards would protect the genuinely disabled but limit benefits for others. Don't hold your breath. For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. "People are driven into the program by desperation," says Autor. Nor are they rolling in money; the average payment is about $14,000 a year.
Lawyers would also resist big changes. The Social Security Administration initially rejects about two-thirds of applications, but about half of these are appealed by lawyers and other professional advocates before administrative law judges, where the approval rate is between 60 percent and 75 percent. In a series of well-reported stories, The Wall Street Journal's Damian Paletta showed that the system is open to abuse. But it's also lucrative. Lawyers and other advocates are entitled to 25 percent of back benefits up to $6,000 per case. Their total payments approach $1.5 billion annually.
The larger budget quagmire now comes into focus. What the federal government does is so vast that it suffocates informed debate and political control. The built-in bias for the status quo reflects the reality that the various parts of government are understood, defended and changed mainly by those who benefit from their existence. However strong the case for revision (and it is powerful here), it is tempered by political inertia. What's sacrificed is the broader public good. The quagmire is of our own making.
Note: Doing the math, the article states roughly $200 billion dollars are spent a year now on disability payments at an average of $14,000/person. $200 billion divided by $14,000 is approximately 14.3 million people on disability. That's like what, the population of Ohio? The article states 8.5 million plus another 2 million children & spouses which totals 10.5 million. My calculation of 14 million doesn't jibe with the stated number of 10.5 million, but regardless, it's huge.
It seems roughly a quarter of the people whose unemployment benefits expire move on to disability payments. They are no longer counted as unemployed which results in a drop in the unemployment rate, but they continue receiving benefits.
Excerpts below.
But how does one survive after losing the unemployment benefits? Clearly people struggle. One way to pay the bills however is to file for and receive the federal disability benefits - assuming of course one has a disability. Interestingly enough, the Great Recession and the slow recovery somehow generated many more disability recipients.
JPMorgan: As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labor force— currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began.
The Sober report then goes on to look at the makeup and maladies of those going on disability:
JPMorgan points out that increases in the number of disability benefits recipients account for about a quarter of the decline in employment participation. Furthermore during recessions the number of new disability claims actually increases, even though the number of jobs with higher injury incidence (such as construction) generally declines. Try explaining that one... Half of the benefit recipients suffer from "mental disorders" and "musculoskeletal disorders" (such as back pain). "Mood disorders" alone account for over 10% of this group. And once someone starts receiving these benefits, it's almost impossible to take the off the program. In 2011 only 1% of the recipients lost their benefits because they were no longer deemed disabled. So how much is this program costing the US taxpayer? Apparently quite a bit.
JPMorgan: The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.
Thus a quarter of people who drop out of the workforce and come off the unemployment benefits, simply move to receiving disability payments. And most stay there until they roll into the social security program when they retire - from their disability. The same source, a different program.
Autor attributes disability's expansion mainly to liberalized, more subjective eligibility rules and to a deteriorating job market for less-educated workers. Through the 1970s, strokes, heart attacks and cancer were major causes. Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981's 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up.
For many recipients, the disability program is a form of long-term unemployment insurance, argue Autor and his frequent collaborator Mark Duggan of the University of Pennsylvania. Benefit applications surge when joblessness rises. From 2001 to 2010, annual applications jumped 123 percent to 2.9 million. On average, recipients start receiving payments at age 49 and keep them until 66, when they switch to Social Security's retiree benefits.
Superficially, the case for overhaul seems overwhelming. Tougher eligibility standards would protect the genuinely disabled but limit benefits for others. Don't hold your breath. For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. "People are driven into the program by desperation," says Autor. Nor are they rolling in money; the average payment is about $14,000 a year.
Lawyers would also resist big changes. The Social Security Administration initially rejects about two-thirds of applications, but about half of these are appealed by lawyers and other professional advocates before administrative law judges, where the approval rate is between 60 percent and 75 percent. In a series of well-reported stories, The Wall Street Journal's Damian Paletta showed that the system is open to abuse. But it's also lucrative. Lawyers and other advocates are entitled to 25 percent of back benefits up to $6,000 per case. Their total payments approach $1.5 billion annually.
The larger budget quagmire now comes into focus. What the federal government does is so vast that it suffocates informed debate and political control. The built-in bias for the status quo reflects the reality that the various parts of government are understood, defended and changed mainly by those who benefit from their existence. However strong the case for revision (and it is powerful here), it is tempered by political inertia. What's sacrificed is the broader public good. The quagmire is of our own making.
Note: Doing the math, the article states roughly $200 billion dollars are spent a year now on disability payments at an average of $14,000/person. $200 billion divided by $14,000 is approximately 14.3 million people on disability. That's like what, the population of Ohio? The article states 8.5 million plus another 2 million children & spouses which totals 10.5 million. My calculation of 14 million doesn't jibe with the stated number of 10.5 million, but regardless, it's huge.
