Disability Insurance and the Great Recession

Abstract

This paper reports research on the Social Security Disability Insurance (SSDI) program, which is designed to provide income to support workers who become unable to work because of a severe, long-lasting disability. The research used administrative data to estimate the effect of labor market conditions, as measured by the unemployment rate, on the number of SSDI applications, the number and composition of initial allowances and denials, and the timing of applications relative to disability onset. The authors analyzed the period of the Great Recession, and compare this period with business cycle effects over the past two decades, from 1992 through 2012. The analysis isolates the quantity and composition of applicants who are induced to apply for SSDI benefits when labor market opportunities decline, and therefore provides important new evidence about the group for whom SSDI application is a substitute for labor force participation, and their impact on the SSDI program.