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Why Did Disability Allowance Rates Rise in the Great Recession?

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Publication Date: August 2013

Publisher(s): Center for Retirement Research at Boston College

Author(s): Norma Coe; Matthew S. Rutledge

Series:

Special Collection:

Topic: Health (Health services for the uninsured)

Keywords: disability insurance; Great Recession; Health care; Long-term care

Type: Report

Coverage: United States

Abstract:

When job opportunities decline due to a weak economy, application rates for Social Security Disability Insurance (DI) typically rise. At the same time, prior research has found that allowance rates – the percent of applicants who are awarded benefits – tend to fall, perhaps because more of the applicants during a recession are too healthy to qualify. The question is whether the same pattern was evident during the Great Recession.

This brief, which summarizes a recent study, confirms that application rates followed the familiar upward pattern during the Great Recession. Indeed, the DI application rate rose by about 33 percent between 2007 and 2010. Yet, the study found that the DI allowance rate rose from 42 percent to 50 percent, despite the fact that applicants were generally healthier than during preceding expansions – a puzzling outcome that is explored in this brief.

The discussion is organized as follows. The first section reviews how individuals’ decisions to apply for DI can be influenced by economic conditions. The second section describes the data and methodology used in the study. The third section presents the results, comparing application rates, allowance rates, and the composition of applicants during the
Great Recession to prior periods. The final section concludes that the cause of the jump in DI allowance rates during the Great Recession is not due to observable characteristics of the applicant pool, but may reflect the recession’s unusual severity, which made it easier for applicants with health limitations to prove that it was too difficult to find a job.