Tightening Social Security Disability Will Obviously Lead To Higher Unemployment

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Joanne Butler Contributor
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When financial analysts crow about the low U.S. unemployment rate and, in the next breath, say the Social Security Disability program needs a fix, I have to laugh. Those analysts fail to account for the 8.8 million workers (as of 2016) who dropped out of the work force and qualified for the disability program. If the disability program’s requirements were tightened, the unemployment rate would rise.

Does President Trump want that? Does the program need to be tightened?

This chart from Social Security explains the link between unemployment and the growth of the disability program. The average age of a beneficiary is 50 or a bit older. In 2016, it was 54.2, which was the oldest for the time series beginning in 1996. It’s probably not a coincidence that as the economy began to recover, fewer workers took disability benefits.

The average age for 2017 will be an important clue. If it’s about the same as 2016 or higher, that’s a strong indicator of the impact of the economy on the disability program.

Notably, many applicants today are from the tail end of the baby boom generation.

The number of beneficiaries jumped from 4.4 million in 1996 to 7 million in 2007, reflecting not only the Great Recession but also the top of the curve in the baby boom’s population as they entered their fifties.

If the beneficiary average age continues to rise, why tighten the program? Why not let the economy and changing demographics fix it?

Some background: Age 50 is a magic number for the disability program. According to the law, people aged 50 and over receive extra points on their disability application. Further, a worker/applicant aged 59 will receive more points than an identical worker aged 50.

Early-cohort baby boomers are ‘aging out’ of the disability program, as they are flipped on to the retirement rolls at the full retirement age (66) or die. In 2016, about 721,000 workers were transferred to the retirement rolls or died.

Is there still room to improve the disability program’s operations and save money? Yes.

Example: Trump’s Office of Management and Budget (OMB) should undertake a line-by-line review of Social Security’s disability operations with a view to terminating programs that aren’t working, such as the Ticket To Work program (to help disabled people return to the workforce). A 10-year review conducted by an outside analytics firm stated: “rigorous impact analyses failed to provide strong evidence of its [Ticket program] impact on employment”.

The statistics prove it. In 2016, 45,000 people had their disability benefits suspended due to work; another 48,000 had their benefits terminated due to work. Contrast these tiny numbers to the 8.8 million workers in the program.

And how many of the approximately 100,000 people with suspended/terminated benefits used the Ticket to Work program to return to work? What was the cost-per-placement for those who did use the Ticket program? These are fair questions for OMB to ask.

President Trump should nominate a commissioner for Social Security too, as the agency hasn’t had one since 2013. Because Commissioners serve for six years, the administration’s commissioner would have time to implement reforms.

Running the Social Security Administration may seem humdrum, especially as its retirement benefits delivery system is super-smooth (one applies online, has a phone chat with a Social Security employee to verify information, and the checks start rolling in).

The disability system, however, is anything but humdrum, and needs a strong, smart commissioner with abundant leadership skills to make it work for Americans in need.

Joanne Butler is a graduate of the Kennedy School at Harvard, was a professional staff member (Republican) at the House Ways and Means Committee, and served in President George W. Bush’s administration. The Ghanaian poet, Kwesi Brew, has described her as ‘vibrant.’

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.