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Disability Applications Spike in Recession

During the Great Recession, the record numbers of Americans who applied for disability included many people who lost their jobs – and it might happen again as the COVID-19 recession plays out.

A 2018 study estimated that 1 million people applied who would not have done so if there hadn’t been a recession. By October 2009, as the jobless rate was peaking, the additional applicants increased the total applications to the U.S. Social Security Administration by 16.5 percent.

The average age of these applicants was 53, and they tended to have impairments that were musculoskeletal or cognitive in nature. Because these impairments are less severe, they were more likely to be denied benefits, often resulting in an appeal.

In contrast, the people who would’ve sought disability benefits even in a strong economy tended to have serious medical conditions such as Crohn’s or chronic kidney disease that usually qualify them automatically under the disability program’s vetting system.

Ultimately, among the applicants who applied in response to the recession, 42 percent were awarded benefits, according to the study funded by the Social Security Administration and based on an analysis of the agency’s disability records.

When they did receive benefits, they were more often awarded on the basis of having a functional limitation and no transferable skills. As a result, many people who used to work were nevertheless approved for benefits, because their options for transferring their skills from their old job to a new job were limited.

Adding so many people to the disability system carried a steep price in terms of an increase in administrative and benefit costs. But the formerly productive workers also paid a price.

“Once people qualify” for disability benefits, the researchers said, “they rarely re-enter the labor force.”

To read the study, authored by Nicole Maestas, Kathleen Mullen, and Alexander Strand, see “The Effect of Economic Conditions on the Disability Insurance Program: Evidence from the Great Recession.”

Read more blog posts in our ongoing coverage of COVID-19.

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.

3 Responses to Disability Applications Spike in Recession

  1. Chakradhar says:

    Thank you for giving information about the Recession

  2. Geoffrey Hewitt says:

    So I applied for disability almost 10 years ago and was approved due to a serious illness called IPF. Almost 9 years ago I received a life saving single left lobe lung transplant because of a disease that destroyed my lungs and ability to breath; it is called one of 23 compassionate allowances as defined by Social security. Without this benefit, I would probably have been homeless or have to live with my kids a a burden; I paid into this system for 30 years while working so I felt entitled to the benefit; 90 K pills later and 62% lung capacity I am grateful to be here but work at it daily to stay healthy.

  3. Trollopian says:

    It’s very important, as this post states, to recognize that denial rates generally go up in a recession! “Because these impairments are less severe, they were more likely to be denied benefits, often resulting in an appeal.” The criteria for getting disability benefits are pretty strict, and they don’t get laxer in recessions.

    The Social Security actuaries have documented that denial rates tend to go up in recessions even as applications rise. See https://www.cbpp.org/blog/disability-benefits-are-hard-to-get-even-in-recessions.

    (Recessions really wallop the disability trust fund on the revenue side, more so than on benefits. See https://www.cbpp.org/blog/how-the-recession-hurt-disability-insurance-and-its-not-what-you-think.)

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