Federal Aid May Help Kids Later in Life

President Biden has said he wants to increase the benefits in a federal program for low-income children and adults with disabilities. But a long-running debate about the program is whether the direct cash assistance helps children when they grow up.

The Supplemental Security Income program, or SSI, clearly has immediate benefits. SSI provides nearly $800 in monthly cash payments and Medicaid health insurance to help parents care for their children and teenagers and manage their physical, cognitive, or behavioral disabilities. However, policy experts disagree on the program’s long-term effects.

Critics say it creates a negative dynamic if it causes poor parents, consciously or unconsciously, to lower their expectations for a child in order to preserve the payments. If the child has a relatively mild disability, the stigma might discourage educational achievements that would ultimately boost his earnings potential as an adult.

However, one analysis in a new study found no evidence that the future earning power of children receiving SSI was affected. This analysis compared kids whose benefits started before and after a 2001 administrative change that led to more benefit terminations.

A second analysis supported the argument made by SSI’s proponents that the program has broader long-term benefits for children. The additional financial resources enable parents to provide more of the educational experiences, nutritious meals, or stable home life that can improve their children’s future prospects.

To assess the merits of this long-term benefits story, the researcher used a different, more indirect approach. This approach was based on a medical exam for 18-year-old SSI recipients that was introduced in 1996 to determine whether their benefits would continue. The researcher compared the future earnings of the younger siblings in poor families in which the 18-year-olds did and did not lose their benefits.

When the 18-year-olds retained their SSI benefits, their younger siblings earned more as adults than the younger siblings in families that had lost benefits. This pattern held true both for the younger siblings who received SSI themselves and for the siblings who did not receive SSI.

The researcher concluded that the evidence suggests that SSI’s household resources may channel a large positive effect on child human capital.

To read this study, authored by Manasi Deshpande, see “How Disability Benefits in Early Life Affect Long-term Outcomes.” 

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 author 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.