The National Bureau of Economic Research recently released a paper examining the effect of economic conditions on the Social Security Disability Insurance (SSDI) program after examining the recession we experienced about 10 years ago. The authors of this paper deducted that nearly 1 million SSDI applications were filed during the recession that otherwise would not have been filed if the economy had not been struggling to such a degree.
During 2008-2012 the recession led 1.4 million former workers to apply for SSDI benefits. About 28 percent of these people would have filed for SSDI benefits regardless of the economy, but 72 percent of the applicants probably would not have filed for benefits had the recession not been so severe, the paper stated. It was estimated that during the recession’s peak, Social Security was receiving more applications than usual which increased the backlog of applications, which then leads to hearing backlogs that can still be seen today.
The Paper’s Analysis
We examine the effect of cyclical job displacement during the Great Recession on the Social Security Disability Insurance (SSDI) program. Exploiting variation in the severity and timing of the recession across states, we estimate the effect of unemployment on SSDI applications and awards. We find the Great Recession induced nearly one million SSDI applications that otherwise would not have been filed, of which 41.8 percent were awarded benefits, resulting in over 400,000 new beneficiaries who made up 8.9 percent of all SSDI entrants between 2008-2012. More than one-half of the recession-induced awards were made on appeal. The induced applicants had less severe impairments than the average applicant. Only 9 percent had the most severe, automatically-qualifying impairments, 33 percent had functional impairments and no transferable skills, and the rest were denied for having insufficiently severe impairments and/or transferable skills. Our estimates imply the Great Recession increased claims processing costs by $2.960 billion during 2008-2012, and SSDI benefit obligations by $55.730 billion in present value, or $97.365 billion including both SSDI and Medicare benefits.
