How policy variables influence the timing of applications for Social Security Disability Insurance

This article analyzes the impact of policy variables--employer accommodations, state Social Security Disability Insurance (DI) allowance rates, and DI benefits--on the timing of an application for DI benefits by workers with a work-limiting health condition starting when their health condition first begins to bother them. The analysis uses a rich mixture of personal and employer characteristics from the Health and Retirement Study linked to Social Security administrative records. We find that most workers do not apply immediately for DI benefits when they are first bothered by a health condition. On the contrary, the median working-age man with a work-limiting condition waits 7 years after that time before applying, and the median working-age woman waits 8 years. Although the risk of applying for benefits is greatest in the year following onset, only 16 percent of men and 13 percent of women in our sample apply within the first year, and the risk of application falls thereafter. That finding suggests that institutional factors, in addition to health factors, may play a role in the timing of DI applications. Using kernel density estimates of the distribution of application and nonapplication ordered by state allowance rates (the rate of acceptance per DI determination in each state), we find that both men and women who live in states with high allowance rates are disproportionately more likely to apply for benefits in the first year after their condition begins to bother them than are those in states with low allowance rates. Using life-table analysis, we also find that men and women who are accommodated by their employers are significantly less likely to apply for DI benefits in each of the first few years after their condition begins to bother them than are those who are not accommodated. On the basis of this evidence, we include these policy variables in a model of the timing of DI application that controls for other socioeconomic variables as well as health. Using a hazard model, we find that workers who live in states with higher allowance rates apply for DI benefits significantly sooner than those living in states with lower allowance rates following the onset of a work-limiting health condition. Workers who are accommodated following the onset of a work-limiting health condition, however, are significantly slower to apply for DI benefits. Using the mean values of all explanatory variables, we estimate the relative importance of changes in these policy variables on the speed with which workers apply for benefits after onset. We find that the mean time until application for men is 10.22 years. Universal accommodations following onset would delay application by 4.36 years. In contrast, a 20 percent decrease in state allowance rates would delay application by only 0.88 years. For working-age women, the average expected time until application once a condition begins to bother them is 10.58 years. Universal accommodations would delay that by 3.76 years, and a 20 percent decrease in allowance rates would delay it by 1.47 years. A complication in this analysis is that the policy variables are to some degree endogenous. Accommodation is probably offered more often to workers who want to continue working. Allowance rates are chosen by states on the basis of federal policy and local choices and probably in part on the health condition of workers in the state. Therefore, our estimates are upper bounds of these policy effects. Still, we believe we provide evidence that the social environment faced by workers with work-limiting health conditions can significantly influence their decision to apply for DI benefits, holding their specific health conditions constant.     

Influencing retirement behavior: A key issue for social security

Recent trends toward earlier retirement threaten future supplies of labor and the financial stability of many of our public and private pension systems. One of the few federal efforts now in place to reverse this trend has been the 1977 law outlawing mandatory retirement before age 70 for most American workers. This legislation by itself will have little effect on retirement patterns, because strong financial incentives to retire remain imbedded in the system. Changes in the Social Security Act enacted this year begin to recognize these incentives but are highly controversial and at best will not begin to go into effect until 1990. To be successful, efforts of policymakers to increase work at older ages must focus on the financial incentives at the heart of retirement plans rather than on merely attempting to weaken mandatory retirement constraints.     

How people with disabilities fare when public policies change

Changes in public policy and in macroeconomic conditions have dramatically affected the economic well-being of people with disabilities over the past two decades, both absolutely and relative to people without disabilities. Using data from the Current Population Survey (1968–1988), we find that the households of white or well-educated males with disabilities have fully recovered from the program cuts and recession of the early 1980s. However, much of this recovery was due to additional earnings by other household members. The households of males who are “doubly handicapped”—nonwhite or poorly educated males with disabilities—have not recovered. We conclude that the new mandates on business aimed at integrating people with disabilities into the workplace are not likely to significantly benefit the doubly handicapped.     

The minimum wage and the poor: The end of a relationship

The belief that minimum-wage legislation helps the working poor is one reason for its continued popular support. The authors track the household incomes of low-wage workers and find that a radical transformation has occurred in the half century since the passage of the original minimum-wage law. Today most low-wage workers live in households well above the poverty line. Hence, those living in poverty will get only about 11 percent of the gains from the higher minimum-wage increase proposed in the Kennedy-Hawkins Bill. Low-wage workers in families with incomes three or more times the poverty line will get nearly 40 percent. Thus it is not clear that increases in the minimum wage make good policy even if no jobs are lost as a result.     

How postsecondary education improves adult outcomes for Supplemental Security Income children with severe hearing impairments

The rapid growth in the number of children participating in the Supplemental Security Income (SSI) program before the age of 18 has led policymakers to consider new methods of assisting children with disabilities in their transition from school to work. Postsecondary education represents one path that SSI children may take to acquire the skills necessary to enter employment and reduce dependency on the SSI disability program as adults. Yet little is known about SSI children's experience with postsecondary education, let alone their ability to increase their labor market earnings and reduce their time on SSI as adults in the long term. This lack of information on long-term outcomes is due in part to a lack of longitudinal data. This article uses a unique longitudinal data set to conduct a case study of SSI children who applied for postsecondary education at the National Technical Institute for the Deaf (NTID) within the Rochester Institute of Technology. The data set was created by merging NTID administrative data on the characteristics and experiences of its applicants to Social Security Administration (SSA) longitudinal data on earnings and program participation. We used this data file to estimate the likelihood that an SSI child will graduate from NTID relative to other hearing-impaired NTID applicants, and we estimated the influence of graduation from NTID on participation in the SSI adult program and later success in the labor market. The results of our analysis show that the percentage of NTID applicants who were SSI children increased over time, from a low of 10 percent in 1982 to more than 41 percent in 2000. However, the differences in the probability of graduation from NTID between deaf SSI children and deaf applicants who were not SSI children did not change accordingly. The probability of graduation for SSI children who applied to NTID was 13.5 percentage points lower than for those who were not SSI children. The estimated disparity indicates that targeting college retention programs toward SSI children may be an effective way to improve overall graduation rates. Our results also show that SSI children who graduated from NTID spent less time in the SSI adult program and had higher earnings than SSI children who did not gradu- ate. Compared with SSI children who were accepted to NTID but chose not to attend, SSI children who graduated from NTID left the SSI program 19 months earlier, were less likely to reenter the program, and at age 30 had increased their earnings by an estimated 49 percent. Our findings demonstrate that SSI children need not be relegated to a lifetime of SSI participation as adults, despite the poor overall labor market experience of this population since the creation of the SSI program in 1974.