NEW YORK—With millions of Americans’ unemployment benefits expiring, and as the Social Security Administration comes under increasing pressure to reform its financially–troubled entitlement program, policymakers are asking whether a significant amount of Americans are bilking disability benefits from federal coffers. A new study from Columbia Business School sheds light on the answer.
The research, titled “Unemployment Insurance and Disability Insurance in the Great Recession,” refutes the idea that the jobless and uninsured flock to disability benefits when their unemployment benefits expire.
“Contrary to the beliefs of many, even in policy circles, our research proves that the unemployed do not directly file for disability following the exhaustion of benefits,” says Columbia Business School Professor Andreas Mueller, who helmed the study. “The evidence is just not there. As a matter of fact, fewer than 2 of workers whose unemployment benefits had expired actually applied for disability insurance.”
The study was co–conducted by University of California, Berkeley Professor Jesse Rothstein, and University of California, Los Angeles Professor Tim M. von Wachter.
Until now, little research has been conducted regarding the degree to which Social Security Disability Insurance (SSDI) is used by workers who exhaust their unemployment benefits. There have been concerns for years by the public and in policy circles that the explosion of SSDI is due to these displaced workers.
Mueller and his colleagues looked at nearly a decade worth of data to determine whether there was a significant drop or rise in disability insurance applications during periods of widespread variability in unemployment extensions.
The data includes sources that are being used for the first time to investigate the relationship between unemployment insurance exhaustion and disability insurance applications. Through statistics gathered from the Social Security Administration, the researchers analyzed applications to disability insurance and their award rates, and how that information relates to the number of people exhausting unemployment insurance benefits. The researchers assumed that workers would apply for disability either three months prior or following the exhaustion of benefits.
Unemployment Insurance Exhaustions and SSDI applications by month, 2004–2012
The above figure shows the number of SSDI applications and number of UI exhaustions at the national level over the period 2004–2012.
“While SSDI applications did rise somewhat over the course of the recent recessions, there appears to be no significant increase in SSDI applications in periods where the number of UI exhaustions dropped to zero due to the large UI extensions that were enacted during those times,” said Mueller.
The research reveals that expiring unemployment insurance does not cause a spike in SSDI. In fact, all of the analyses show a 2 or smaller correlation between the number of workers whose unemployment benefits had been exhausted and the number of those who applied for disability insurance. Even in states that had a lengthy unemployment extension period, Mueller and his co–authors did not observe a significant drop in disability insurance applications.
“Although we cannot rule out small effects, the takeaway here is we can conclude that there is no convincing evidence that workers whose unemployment benefits have expired apply for disability insurance on a large scale,” says Mueller. “These findings suggest that the expiration of federal unemployment insurance extensions will not cause additional harm to the financial solvency of the Social Security program and the SSDI trust fund expected to run out by 2016. I hope that these findings will help alleviate certain questions and concerns about the current system and focus the debate on the aspects of reform most needed.”
To learn more about the cutting–edge research being performed by Columbia Business School faculty members, please visit www.gsb.columbia.edu.
About Columbia Business School
Columbia Business School is the only world–class, Ivy League business school that delivers a learning experience where academic excellence meets with real–time exposure to the pulse of global business. Led by Dean Glenn Hubbard, the School’s transformative curriculum bridges academic theory with unparalleled exposure to real–world business practice, equipping students with an entrepreneurial mindset that allows them to recognize, capture, and create opportunity in any business environment. The thought leadership of the School’s faculty and staff, combined with the accomplishments of its distinguished alumni and position in the center of global business, means that the School’s efforts have an immediate, measurable impact on the forces shaping business every day. To learn more about Columbia Business School’s position at the very center of business, please visit www.gsb.columbia.edu.