January 18, 2022

Downturns Attract Healthier DI Applicants

A theory – untested until now – about why more people apply for federal disability during recessions is that the depression, stress, or unhealthy behaviors caused by unemployment worsen their health and spur them to apply.

This explanation is largely ruled out in a new study out of Cornell University and the University of Illinois.

For each percentage point increase in local unemployment rates, more people with disabilities join the roles – about 45,000 more across the country. This finding, covering a period of 25 years, confirms what the existing research says about the connection between the economy and disability. Disability benefits, which average just under $1,300 per month, look more appealing when employment opportunities are scarcer.

When the researchers investigated why caseloads increased, they found evidence that seemed to contradict the hypothesis that people who apply during downturns are not as healthy.  Once they get on the disability rolls and become eligible for Medicare, annual Medicare spending on these new beneficiaries was slightly less than spending on the people who were already in the program.

Still, the researchers weren’t convinced the recession applicants tend to be healthier. Needing more evidence, they looked at Medicare spending for the disability beneficiaries who had applied to the program at 50. At that age, Social Security loosens the eligibility rules, making it easier to qualify.

The logic behind this part of the analysis is that the 50-year-old applies not because his medical condition or disability suddenly deteriorates after his birthday but in direct response to unfavorable economic conditions. Individuals pulled into the disability insurance program by the laxer rules are actually healthier: Medicare spends about $1,000 less per year on them compared to those who applied at 49.

The 50-year-old applicants are also more sensitive to a sluggish job market: for every percentage point rise in unemployment, the increase in new beneficiaries who’d applied at 50 was about five times more than it was for the 49-year-olds. …Learn More

November 18, 2021

The Economy, Minimum Wage, and Disability

The federal minimum wage is $7.25 an hour and hasn’t budged since 2009. But many states and some municipalities have raised their minimum wages. Today, more than half of the state minimums exceed the federal minimum.

Now a new trend has emerged: 19 states have enacted or approved automatic yearly increases in their minimum wages to protect their residents from inflation. These adjustments just went into effect this year in Arizona, Colorado, Maine, and Washington D.C.

How might higher minimum wages affect applications for disability insurance? On the one hand, the higher pay could prevent some people with mild disabilities from resorting to the fallback option: applying for disability benefits. But if small employers lay people off to cut costs or feel they can’t afford to hire workers at the new higher minimum wage, applications could go up. Facing fewer job opportunities, more low-wage workers might apply for benefits from a program that currently covers some 16 million Americans.

A new study finds that a rising minimum wage does, indeed, increase disability applications to the U.S. Social Security Administration. But the researchers stress that this impact is minimal compared with the increase driven by an economic downturn that throws more people out of work.

In their analysis of nearly 3,000 counties from 2000 through 2015, a one-dollar increase in the minimum wage added some 80,000 more applications to the disability program and its companion, the Supplemental Security Income program for the poor, elderly, and adults with disabilities. That represents a 2 percent increase.

Contrast that to the impact of a rising unemployment rate, which was about three times larger. …Learn More

June 3, 2021

Automation of Jobs Fuels Overdose Deaths

The rise in opioid addiction has created an epidemic of drug overdose deaths in the United States. But what increases the risk that people develop the disorder in the first place?

Automation of the U.S. economy turns out to be a contributing factor, as workers lose good jobs to industrial robots and despair about being disengaged from the labor force, conclude researchers at the University of Pennsylvania and Yale in a study funded by the U.S. Social Security Administration.

Manufacturing jobs, often in unionized industries, used to be a major route to the middle class. But millions of factory jobs disappeared as U.S. companies moved operations overseas. Compounding the job losses, corporate employers began installing robots in their remaining domestic operations. Automation was blamed in one study for eliminating more than 700,000 jobs and causing wage stagnation in the 1990s and early 2000s.

Prior research has connected the flight of manufacturing to increasing deaths from drug overdoses. Now, the new study specifically ties technology – measured as an increase in robots per 1,000 workers – to the increase in overdose deaths.

The men who are most affected by the rise of automation are in their prime working years, and they are concentrated in more industrialized areas. Automation accounted for nearly one in five of their overdose deaths in manufacturing counties. For women, automation was responsible for one in 10 overdose deaths in manufacturing counties. …Learn More

December 8, 2020

Video: Young Adults Share Career Setbacks

More than half of young adults are now living with their parents – the highest level in more than a century, according to the Pew Research Center.

This alarming statistic, first featured in a September blog, is the result of a long-term trend that has accelerated during the economic slowdown caused by COVID-19.

In this PBS NewsHour video by Catherine Rampell, young adults 24 to 39 years old who are taking refuge in their parents’ homes talked about their stalled social lives and disrupted careers – their disappointments always tinged with a sense of humor.

They include Marcellus Adams, who was laid off from two jobs, as an auto mechanic and emergency room staffer, and, at 29, has never really lived on his own. Eric Rivera moved from the height of chic – an apartment in the Williamsburg section of Brooklyn – to his parents’ home in a suburb of Trenton, New Jersey. And comedienne Nikki Glaser’s white-hot career suddenly cooled when her shows were canceled due to the pandemic.

They and millions of Millenials and members of Generation Z may pay a price for their setbacks in the form of lower earnings and unplanned-for career trajectories.

But a vaccine is coming, they are young, and they will persist.

Read our blog posts in our ongoing coverage of COVID-19. …Learn More

October 13, 2020

The Economics of Being Black in the U.S.

The COVID-19 recession demonstrates an axiom of economics. Black unemployment always exceeds the rate for whites, the spikes are higher in recessions, and, in a recovery, employment recovers more slowly.

A record number of Black Americans were employed in 2019. But when the economy seized up in the spring, their unemployment rate soared to 17 percent, before floating down to a still-high 12.1 percent in September.  Meanwhile, the white unemployment rate dropped in half, to 7 percent.

The much higher peaks in the unemployment rate for Blacks than whites and the slower recovery are baked into the economy.

This phenomenon occurred during the “jobless recovery” from the 2001 downturn. When the economy had finally restored all of the jobs lost in that recession, the Black jobless rate remained stubbornly higher.

And after the 2008-2009 recession, as the University of California, Berkeley’s Labor Center accurately predicted at the time, Black unemployment hovered at “catastrophic levels” longer than the white rate did.  This disparity is now the issue in the COVID-19 recession.

Geoffrey Sanzenbacher, a Boston College economist who writes a blog about inequality, gives three interrelated reasons for Black workers’ higher unemployment rates.

First, “The U.S. still has a tremendous amount of education inequality, and the unemployment rate is always higher for people with less education,” he wrote in an email. Despite the big strides by Black men and women to obtain college degrees, roughly 30 percent have degrees, compared with more than 40 percent of whites, he said.

Second, Black workers without degrees are vulnerable because they are more likely to earn an hourly wage. An hourly paycheck means that a company can cut costs by simply reducing or eliminating a worker’s hours. “It’s much easier to lay off hourly workers, whose employment is more flexible by nature, than salaried workers,” Sanzenbacher said. …Learn More

September 8, 2020

A Laid-off Boomer’s Retirement Plan 2.0

Jennifer Lee wanted to work until 70 to max out her monthly Social Security checks – at least that was the plan before she was laid off three years ago from a Washington D.C. church.

The church’s newly hired pastor “decided he wanted a whole new staff,” she said. “I felt to a degree he was entitled to do that,” she said – except that “he was only eliminating people on the staff who were over 60.”

She wasn’t having any luck finding a new job and felt that her only choice was to sign up for Social Security at 63½ to pay her bills. Eventually, Lee, a one-time nurse and medical administrator, landed a nice part-time job as a Jack-of-all-trades in an oral surgeon’s office. Post-pandemic, her duties have expanded to include overseeing the COVID-19 safety protocols.

The recession is putting many baby boomers in a predicament similar to Lee’s: a layoff has derailed their plans to work full-time to build up their retirement savings. Since March, the unemployment rate for Americans who are at least 55 years old has more than tripled, to 9.7 percent in June.

“Most older people, when they’re laid off, will take Social Security right away,” but “that’s not their best short-term solution,” said Wendy Weiss, a Cambridge, Mass., financial adviser. She urges them to find other ways to generate income or reduce expenses, because delaying Social Security increases the monthly check by 7 percent to 8 percent for each additional year the benefits are postponed.

But, Weiss acknowledges, the recession is putting growing numbers of unemployed boomers in situations that aren’t easily solved. “It’s not going to be pretty,” she said about the next few years.

Lee, who is 65, was fully aware she should have postponed her Social Security. But it took her more than six months to find her current job, and she didn’t have any unemployment benefits to tide her over, because church employers don’t usually pay into state unemployment insurance funds. She wasn’t old enough for Medicare at the time of her 2017 layoff either.

“I waited five months to apply for Social Security. I waited as long as I could,” she said.

She sees a problem not in the difficult decisions she’s had to make but in a shortage of policies for older workers like herself, who may be more vulnerable to layoffs and also can have a tougher time finding a new job even in an expanding economy. …Learn More

August 18, 2020

Recession’s Hit to Cities Varies Widely

The COVID-19 recession is unlike anything this country has seen.

If the second-quarter contraction were to continue at the same pace for a full year, the economy would shrink by a third! This is the deepest downturn since the Great Depression, and low-income Americans are feeling the brunt of it.

What makes this recession unique, however, is that the low-income people living in the most affluent metropolitan areas are worse off than low-income residents of less affluent cities, Harvard economist Raj Chetty explained during a recent interview on Boston’s public radio station, WBUR.

“What’s going on is that affluent folks have the capacity to self-isolate, to work remotely, to not go on vacation,” he said. “So in affluent areas, you see enormous drops in consumer spending and business revenue.”  In these areas, more than half of the lowest-income workers have lost their jobs, and many of them worked in small businesses, he said.

In less affluent cities, people have to go to work and “are out and about more, and business revenue hasn’t fallen nearly as much,” he told his radio host. “In previous recessions, we haven’t seen those sort of patterns.”

Chetty’s point is demonstrated by comparing what happened to consumer spending this year in San Francisco and Fresno, California, on the tracktherecovery.org website he and other economists have created. (Visitors can sort the spending data by state, industry, and consumer income levels, as well as by city.) …Learn More