Do Stronger Employment Discrimination Protections Decrease Reliance on Social Security Disability Insurance? Evidence from the U.S. Social Security Reforms

Upjohn Institute Working Paper 20-326, 2020

75 Pages Posted: 9 Jun 2020

See all articles by Patrick Button

Patrick Button

Tulane University, Department of Economics; National Bureau of Economic Research; IZA Institute of Labor Economics

Mashfiqur Khan

Boston College - Center for Retirement Research

Date Written: May 12, 2020

Abstract

The United States Social Security Amendments of 1983 (SSA1983) increased the full retirement age (FRA) and increased penalties for retiring before the FRA. This cut to retirement benefits caused spillover effects on Social Security Disability Insurance (SSDI) applications and receipt by making SSDI relatively more generous. We explore if stronger disability and age discrimination laws moderated these spillovers, using variation whereby many state laws are broader or stronger than federal law. We estimate the effects of these laws on SSDI applications and receipt using a difference-in-differences approach, comparing cohorts affected by SSA1983 to similarly aged unaffected cohorts, across states. We find that a broader definition of disability, where only a medically diagnosed condition is required to be covered under state law, significantly reduces SSDI applications induced by SSA1983, but has no effect on SSDI receipt, likely because the foregone applications were for those with less severe conditions that were unlikely to have been approved for SSDI. We find some evidence that other broader or stronger features of state disability discrimination laws reduce both SSDI applications and receipt. We do not find much evidence that age discrimination laws reduce spillovers to SSDI. These results suggest that broader and stronger disability discrimination laws reduce employment barriers, allowing older individuals to work longer, possibly reducing reliance on SSDI and costly applications to SSDI.

Keywords: Disability, Aging, Discrimination, Employment Law, Disability Insurance, Social Security, Americans With Disability Act, Age Discrimination in Employment Act, Social Security Amendments of 1983

JEL Classification: H55, J71, J78, K31, J14, J26

Suggested Citation

Button, Patrick and Khan, Mashfiqur, Do Stronger Employment Discrimination Protections Decrease Reliance on Social Security Disability Insurance? Evidence from the U.S. Social Security Reforms (May 12, 2020). Upjohn Institute Working Paper 20-326, 2020, Available at SSRN: https://ssrn.com/abstract=3598968 or http://dx.doi.org/10.2139/ssrn.3598968

Patrick Button (Contact Author)

Tulane University, Department of Economics ( email )

New Orleans, LA 70118
United States

HOME PAGE: http://www.patrickbutton.com

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Mashfiqur Khan

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

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