Does the Disability Insurance (DI) Program Disincentivize Labor?

Since the inception of the DI program in the 1950s, economists, social scientists, and legislators have asked whether or not it disincentivizes labor. As is the case with nearly any kind of safety net, some will abuse it, so many of the DI program’s critics’ concerns are legitimate. However, a look at the demographics and vocational profiles of DI recipients suggests that the program does not disincentivize labor in any meaningful way, and that even with the DI’s work allowance (because eligibility criteria do not preclude recipients from working), most DI recipients would be otherwise unable to earn a living.

According to 2011 data collected by the Social Security Administration (SSA), more than two-thirds of DI recipients are over the age of 50, and 30% of them are older than 60. The typical DI beneficiary suffers from a severe medical impairment and faces a mortality rate some 3 to 5 times greater than average. Furthermore, only about one-quarter of DI beneficiaries have a high school diploma. With a high school education, even a non-disabled worker’s job prospects are poor, especially so in a depressed economy.

Multiple longitudinal studies (Mamun, O’Leary, Wittenburg, & Gregory (2011); Liu and Stapleton (2011); Maestas, Mullen, & Strand (2011)) have found that most DI beneficiaries cannot work, and of those who can, they cannot do so for more than short periods of time – and for very low wages. Furthermore, research has found that barely 50% of DI applicants whose applications were rejected due to ineligibility had any earnings at all, and of those who did, their job prospects were poor and earnings very low. This data suggests that DI eligibility criteria do a relatively good job of awarding benefits to those who truly need them in order to survive.