How Does The Economy Affect Disability Claims?

     The abstract of The Effect of Economic Conditions on the Disability Insurance Program: Evidence from the Great Recession by Nicole Maestas, Kathleen J. Mullen and Alexander Strand:

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.

     I think that the factors that affect the filing of disability claims are far more complex than these authors have contemplated. It's obvious from statements made in the body of this study that the authors visualize people being laid off and immediately filing disability claims with Social Security but anyone involved in the disability claim process knows that that's not the way things usually worked then, now or anytime. Whatever the reasons for stopping work, only a small minority of disability claimants file their claims immediately after stopping work. There's usually a gap of at least several months and sometimes several years before people file their claims. When asked why they waited so long, people often answer that they kept hoping their condition would improve. The length of the gap between work ending and disability claim being filed can certainly be affected by the economic status of other people. The disability claim may be precipitated by the layoff of a family member, such as a spouse, who had been supporting the disabled person.
     The length of the gap between leaving work due to illness or injury and filing a disability claim may also be influenced by perceptions of how difficult it is to obtain Social Security disability benefits. One of the reasons people delay filing a claim is that they perceive, somewhat accurately, that it's difficult to be approved for Social Security disability benefits. I know that's not a rational way to act but people are often irrational. I'm pretty sure that the public perception of how tough it is to be approved isn't stable. I got the strong impression that in 2008 and 2009, after Barack Obama was elected President, that people thought it was becoming less difficult to be approved. They were wrong. It didn't get less difficult to get approved but that's what people thought and their misconception affected their behavior. Of course, Obama's election happened at a time when the economy was crashing and was, in part, due to that crash making it impossible to sort out everything that was going on.
     The authors of this study seem to visualize people being laid off from their jobs and then marching in to file disability claims. There are some disability claimants who have recently lost their jobs due to a general layoff but I'd estimate that at less than 10%. Most people who file disability claims, both then and now, made the decision on their own to leave employment due to illness or injury. Some of these decisions may be indirectly induced by their employer's business circumstances. Businesses in financial trouble often try to get more productivity out of their employees. An employee who could handle their job as it had been normally performed becomes unable to perform it when more is expected from them. Some who file disability claims have been fired because they could not do the job. Employer decisions on when to let an employee go on medical grounds can be affected by an employer's business circumstances. Someone who is a borderline employee in good times becomes an unnecessary burden in bad times. 
     I think this whole subject deserves more research and that sociologists need to be involved. At the least, someone needs to do research on how the gap between the date of becoming disabled and the date of filing a disability claim has changed over time. Social Security already has that data. It's just a matter of mining it from their databases. My guess is that that gap went way down in 2008 and 2009.