Posts Tagged "unemployment"

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

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2 Options in an Emergency: Savings or Family

The pandemic was a crash course in the importance of having some money in the bank for an emergency.

When COVID started to spread, jobs vanished, mothers abruptly stopped working to care for children who weren’t in school, and, for the unlucky people who became ill, the medical bills rolled in.

Congress took extraordinary measures during these extraordinary times and approved three rounds of relief payments totaling several thousand dollars per household in 2020 and 2021. But the federal payments, along with extra unemployment benefits and an increase in the child tax credit, weren’t enough to keep everyone afloat.

That left the people who didn’t have any savings with one other fallback option to get them through the tough times: borrowing from a family member.

The non-savers resorted to borrowing from family at three times the rate of people who did have savings – 15 versus just 5 percent, according to surveys conducted in 2020 and 2021 by the financial services company, BlackRock.

But borrowing from family to ease financial strains causes another problem: the people who got help from family said it stressed them out, the survey found.

Right now, the economy is doing pretty well, and jobs are plentiful. It might be time to think about a New Year’s Resolution. Many workers are still barely getting by, and it can be difficult to save. But at least give it a try.

The next time you have a financial emergency, Congress probably won’t be there to bail you out.

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

COVID Hasn’t Pushed Boomers into Retiring

Three months into the pandemic, a few million older workers had been laid off or quit. But what happened next?

The rapid drop in employment due to COVID gave the Center for Retirement Research an unusual opportunity to study the labor force decisions of baby boomers, who are within striking distance of retirement age but may or may not be ready to take the leap.

Traditionally, older workers who left a job tended to retire. But there was little indication that the people who stopped working during the pandemic saw retirement as their best fallback option.

This conclusion by the researchers is consistent with the pre-COVID trend of boomers working longer to put themselves in a better financial position when they eventually do retire. In fact, many older workers have returned to the labor force as the economy has rebounded and vaccines have become widely available.

Little impact on older workers retiringBut in April 2020, job departures spiked before settling back down at a new, much higher level. The annual pace of departures increased from 15 percent of workers 55 and over in 2019, prior to COVID, to 23 percent in 2020.

The researchers found a surprise when they looked at who stopped working. Although older people are vulnerable to becoming seriously ill from COVID, age wasn’t a big factor in their decisions. Boomers in their 60s were no more likely to leave their jobs than people in their mid- to late-50s, according to the analysis of monthly Census Bureau surveys.

The groups most likely to leave the labor force were women, Asian-Americans, and workers who either don’t have a college degree or don’t have a job that easily lends itself to working remotely.

But among all of the age 55-plus workers in the study, the share reporting that they had retired barely increased, from an average of 12 percent prior to COVID to 13 percent last year.

The only people who left their jobs and retired in significant numbers during the pandemic were over 70. This finding reinforced what the researchers found in data from the U.S. Social Security Administration: the pandemic didn’t have a major impact on retirement because the share of workers between 62 and 70 who signed up for Social Security was relatively flat between April 2019 and June 2021. …Learn More

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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

700,000 Retirees are Behind on Mortgages

Boy and grandma playing soccerIn the second half of 2020, the number of retired homeowners who fell behind on their mortgage payments doubled to about 1 million per month.

By July of this year, it had dropped to 680,000 retirees. The federal Consumer Financial Protection Bureau (CFPB), which issued the report on homeowners over age 65, said about 12 percent of this population is vulnerable to imminent foreclosure and possibly homelessness. Some of the people who are having the hardest time paying their loans either have disabilities or are over 75.

But most the retirees in the CFPB report are largely reliant on Social Security, so their income is stable. To understand why they’re having problems paying the mortgage requires reading the tea leaves in the CFPB report. More than half of the retirees with past due mortgages live with at least two other people, including children and teenagers.

Lower-income people in multigenerational households typically share the burden of paying their living expenses. If a retired homeowner’s adult family member lost a job because of the pandemic, the homeowner might not be getting the money she needs to pay the mortgage. The CFPB survey confirms this is occurring: more than a third of older homeowners who are behind on their mortgages said a family member was unemployed.

Many of the people who are struggling had less than $25,000 in retirement income or were people of color. Their family members in the multigenerational households – presumably people of color – also may have worked in lower-paid jobs and bore the brunt of last year’s layoffs and reduced hours at work. …Learn More

Elderly couple at a window

Retirement Researchers to Meet Aug. 5-6

The pandemic will be on the marquee at this year’s annual meeting of retirement and disability researchers.

COVID-19 has encroached on every aspect of older Americans’ lives, from their day-to-day work and home life to their retirement planning. Researchers will present studies on three impacts of the pandemic in presentations funded by the U.S. Social Security Administration.

The event will be held over two days, Thursday and Friday, Aug. 5 and 6, from noon to 4 p.m. The event will be virtual again this year and anyone can sign up to attend for free.

The first study on the agenda will explore the pandemic’s impact on older workers’ ability or willingness to work and on their retirement decisions. And for the adults who lost their jobs during COVID-19’s economic downturn, a second study will explain whether the slump will affect their future Social Security benefits. In the final study relating to the pandemic, researchers will assess whether the relief bills passed by Congress helped older people.

Other prominent topics of discussion include retirement planning and retirees’ financial security. These will include new findings on workers’ decisions about saving, retirees’ decisions about spending, and the financial adjustments couples make after their children leave home.

The final major topic is federal benefits for people with disabilities. The presentations here include the relationship between the benefits and two government programs: food stamps and workers compensation insurance.

Summaries of the working papers will be posted online for the meetings. …Learn More

Photo of the board game Life

Here’s Why People Don’t Save Enough

In the United States and Singapore – places that emphasize self-reliance – many older workers and retirees admit that, if given a do-over, they would have saved more money over the past 20 or 30 years.

Regret was more common in the United States – 54 percent of older Americans had it versus 46 percent in Singapore, according to comparable surveys in each place. Perhaps the reason Singapore has less is because the government requires that employees set aside more than a third of their income in three government-run savings accounts for retirement, healthcare, and home purchases and other investments. On the other hand, Singapore doesn’t have Social Security or unemployment insurance, and private pensions are rare.

Whatever the differences, regret is a common sentiment in Singapore and the United States. What researchers wanted to know is: what is the source of that regret?

They tested two hypotheses. One is the human tendency to procrastinate and never get around to tasks that should be a priority. The other reason is largely outside of workers’ control: financial disruptions earlier in life that sabotage efforts to save, such as a layoff or large medical bill.

Employment problems, the researchers found, were a major source of saving regrets for 60- to 74-year-olds in both places but the impact was especially strong in the United States, which historically has had a more volatile labor market than Singapore. Disruptions that interfered with workers’ ability to save included bouts of unemployment and earning less than they were expecting. Early retirements and disabilities also led to saving regrets, as did unanticipated health problems and bad investments.

But procrastination as a reason for regret did not stand up to scrutiny. In this part of the survey, individuals agreed or disagreed with various statements designed to indicate whether they were procrastinators, including whether they work best under pressure or put off things they’re not good at. …Learn More