From the Wall Street Journal today:
The sharp rise in federal disability rolls in recent years has sparked worry that able-bodied workers are using the system to hide from the weak job market. But new research suggests those fears may be overblown…The sharp rise in federal disability rolls in recent years has sparked worry that able-bodied workers are using the system to hide from the weak job market.
Economists have long known that disability filings go up during recessions, but they aren’t sure why. Perhaps the most worrisome theory is that displaced workers are essentially using disability insurance as a form of extended unemployment benefits, either by exaggerating real disabilities or through outright fraud.
University of California, Berkeley economist Jesse Rothstein set out to test that theory. He reasoned that if the increase is being driven by unemployed workers gaming the system, there ought to be a correlation between expiring jobless benefits rising disability claims. After all, there’s no need to file for disability insurance — often a long, involved process — if you can still draw an unemployment check.
When Mr. Rothstein looked at the data, however, he found no such correlation. When the unemployment rate started rising in 2008 and 2009, the government extended unemployment benefits, leading to a drop in the number of people exhausting their payments. Yet the number of people filing for disability kept on rising. In more recent years, the government has cut back unemployment benefits, leading to an increase in expirations, but the number of disability applications has remained flat or even slowed.