Sep 4, 2015

Work Incentives Don't Matter Much

    The Center on Budget and Policy Priorities (CBPP) has issued a report on benefit offset proposals for Social Security's disability programs. To vastly oversimplify, claimants can now work for a year and earn as much as they can before their cash benefits are completely cut off. This is often referred to as a cliff. The idea would be to replace this cliff with a ramp. Benefits would be gradually reduced by earnings from employment instead of being suddenly cut off altogether. There are several proposals for how this ramp would work. CBPP's report shows that any benefit offset program would be problematic. CBPP is skeptical of any benefit offset proposal. 
     I think the current system is so ridiculously complicated that a change to a benefit offset system would be a good idea. There would certainly be problems with a benefit offset system but those problems are far less than the problems we have now. I don't think that CBPP comprehends just how difficult it is to administer the current system. I suppose those practical problems don't matter to you if you're sitting in a think tank in D.C. and never have to deal with implementing the preposterous mess we have now.
     The far more important point in the CBPP report is that anyone who thinks that tinkering with work incentives is going to save money doesn't understand the problem. It doesn't matter what work incentives are implemented, very few Social Security disability recipients will return to work.
     The belief that tinkering with work incentives could save a lot of money arises out of persistent confusion about who is drawing Social Security disability benefits. Here are the misconceptions:
  • Many people visualize Social Security disability recipients as having health problems that will get better over time when, in fact, very few do get better. The vast majority get worse as time goes along. You have to have been or be predicted to be disabled for at least a year to get on benefits. If you've got something wrong with you that's going to disabled you that long, it's almost certain to disable you for the rest of your life.
  • Many people think it's not too hard to get on Social Security disability benefits so many who get on benefits could work if they really wanted to. They just need appropriate incentives. Actually, it's incredibly difficult to get on Social Security disability benefits. Few people who get on benefits have any realistic hope of returning to regular, sustained employment.
    None of us want to think we'll become disabled. We're too strong, too hard-working for that to happen to us. That happens to other people. You know, those lazy people who don't want to work. You know who they are. We're not like them. No, if we get sick, we'll get better and we'll be back at work. It would take something catastrophic to disable us. If that happened, we're certainly not have any problems with Social Security and no one would think we'd ever be able to go back to work.  I get a lot of clients who used to think like this. In fact, they still think like this despite their problems getting on Social Security disability benefits. They think that their problems with Social Security are just some weird fluke. But, of course, disability won't happen to us. No, that happens to other people. You know who they are.


Anonymous said...

You are right on this about many disabled people not getting back to work. It took me two and a half years to get approved....and being too sick to work and frightened about whether or not you will get SSD was enough of an incentive for me NOT to try a return to work program...the fear was too great of losing my SSD..and then having to go through the horror of getting approved again. But I never became well enough even to try a return to work program. And yes, I did get worse. The problem I got approved on continues to be just as bad, plus I developed a number of other severe chronic medical issues. Now I'm 63 and I hope I can't get kicked off. But who knows!

M said...

Charles, mine presented an unusual case. An undergraduate and MBA Ivy League graduate,I had worked and earned well above the SSA tax max virtually my entire career--which finally collapsed from long-brewing mental illness in what polite society calls a "nervous breakdown." The ALJ's own CE basically said this guy is shot and will never work again. I'm able to read and understand your post, and reply lucidly, because I'm having a "good day." Think I wanted to exchange my former earnings for this monthly benefit today (which due to the "bends" in the benefit curve isn't commensurate, as you understand, with my insurance contributions)? Hardly. I barely know what tomorrow will bring psychiatrically, let alone next week or next month. Wanna hire me? Didn't think so. So you're dead on correct. What the Congressional R's call "work incentives" are what polite society once called balderdash--though Wall Street has a more colorful word for it.

Anonymous said...

For the people able to use them (definitely less than 5% of beneficiaries) work incentives can help. Make them more easy to understand and fair and you might see a small uptick in use and a reduction in overpayments. Like maybe a percent.