Townhall
Finance...
2.2
Million
Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment
Rate
by Mike
Shedlock
May 6, 2012
Since
mid-2010, precisely at the time millions of US citizens used up all of
their 99
week of unemployment insurance, disability claims have risen by 2.2
million.
Those on disability are not counted in the workforce and are not
considered
unemployed.
Please
consider Disabled Americans Shrink Size of U.S. Labor Force
The number
of workers receiving Social Security Disability Insurance (SSDI) jumped
22
percent to 8.7 million in April from 7.1 million in December 2007,
Social
Security data show. That helps explain as much as one quarter of the
decline in
the U.S. labor-force participation rate during the period, according to
economists at JPMorgan Chase & Co. and Morgan Stanley.
The
participation rate -- the share of working-age people holding a job or
seeking
one -- was 63.8 percent in March after falling to a three-decade low of
63.7
percent in January. Disability recipients may account for as much as
0.5
percentage point of the more than 2 point drop since the end of 2007,
the
economists calculate, and that contribution could grow when some
extended
unemployment benefits expire at the end of this year.
“How we
measure and understand what’s going on in the economy can be influenced
by the
degree to which various public- support programs are available and
being used,”
said Michael Feroli, chief U.S. economist at JPMorgan in New York.
“With a
rising number of disability beneficiaries, there are both lower
unemployment
rates and lower participation rates.”
More than
99 percent of all SSDI beneficiaries remain in the program until
retirement
age, David Greenlaw, a managing director in New York at Morgan Stanley,
wrote
in a March research note, citing government data. The program provides
an
average of $1,111 in monthly income to eligible workers with a physical
or
mental impairment that will last at least 12 months or result in death,
according to Social Security.
Unemployment
insurance requires that applicants search for job opportunities, while
disability insurance requires they be unable to work.
Lax
Screening Procedures
Less-stringent
screening procedures, more attractive benefits and a waning need for
less-skilled
workers have bolstered SSDI rolls.
In
addition, “difficult-to-verify disorders,” including muscle pain and
mental
illness, more easily qualify for SSDI under program reforms, [David]
Autor
[economist at Massachusetts Institute of Technology] wrote in a 2011
paper.
Based on
current trends, 7 percent of the nonelderly adult population could be
receiving
disability benefits by 2018, Richard Burkhauser and Mary Daly wrote in
the
spring issue of the Journal of Policy Analysis and Management. That’s
two years
after the SSDI program will run through its trust fund, according to an
April
report by the Social Security trustees.
Costs
Increase
Costs have
increased with the rolls: The program spent $132 billion last year,
more than
twice as much as in 2000.
Non-Solutions
Richard
Burkhauser, a policy professor at Cornell University, and Mary Daly,
associate
research director at the Federal Reserve Bank of San Francisco, think
the
solution is to raise taxes on businesses with larger shares of people
on disability.
So does
David H. Autor in a white paper The Unsustainable Rise of the
Disability Rolls
in the United States: Causes, Consequences, and Policy Options.
While the
paper provides a clear understanding of the problem, their proposed
solutions,
centering around more taxes, would make it more likely that businesses
fire
workers before they go on disability, make it more likely businesses
will seek
younger, not obese workers in excellent health in the first place.
While I am
sure that happens today, nothing like incentives from the Fed to
increase that
pressure on businesses.
How About
Stopping the Fraud?
Autor’s
proposals dot not go far enough to stop what is clear fraud.
Indeed,
Autor explicitly states “A second lesson, evident from the drug and
alcohol
addiction experience, is that highly motivated applicants in many cases
will
eventually succeed in obtaining benefits, particularly because of the
1984
liberalization of the criteria for pain and mental illness. While this
latter
observation highlights that the SSDI disability determination system is
badly
in need of modernization, my main conclusion is that better gatekeeping
cannot
be the centerpiece of effective SSDI reform.”
I do not
buy that, nor do I buy the
excuse
“Revoking benefits en masse from needy beneficiaries is not politically
viable,
whether or not this would be desirable from an efficiency standpoint.”
What about
the “not-needy, fraudulent beneficiaries”?
Moreover,
this country better come to grips about what is “politically viable”
before
government percent of GDP soars to 56% like it is in France, or worse
yet, the
extremely unstable mess in Greece or Spain.
From an
“efficiency” standpoint one has to be nuts to not to want to stop the
fraud.
And throwing money at alcoholics, drug addicts, and those claiming
mental
stress does nothing but increase those number of claims.
Mental
Illness
I talked
about mental illness and fraud on February 20, 2012 in Disability Fraud
Holds
Down Unemployment Rate; Jobless Disability Claims Hit Record $200B in
January
Pre-crisis,
mental illness constituted about 33% of claims. Now it’s 43%. The cost
is
staggering, over $200 billion a year.
I did some
calculations in the above link and this is what it looks like with a
mere 10%
rate of fraudulent claims.
Unemployment
Rate with 10% Fraud
10% of 27.5
million is 2,750,000.
The
civilian labor force would rise to 157,145,000 from 154,395,000
The number
of unemployed would rise to 15,508,000 from 12,758,000
The
resultant unemployment rate would be 15508/157145 = 9.9%
Is there
anyone who thinks disability fraud is less than 10%? If not, then the
unemployment rate would be at least 9.9% assuming those in fraudulent
claims
started looking for work.
Those
numbers are as of the February BLS jobs release and would undoubtedly
be worse
now given Friday’s Payroll Disaster: Nonfarm Payroll +115,000
Establishment
Survey But -169,000 Household Survey, Labor Force Drops by 342,000
Amazing
Achievement is Fraud
In the last
year, the civilian population rose by 3,638,000. Yet the labor force
only rose
by 945,000. Those not in the labor force rose by 2,693,000.
In the last
month, actual employment fell by 169,000, but the unemployment rate
dropped by
.1%.
That is an
amazing “achievement” to say the least.
Since
Mid-2010 2.2 Million Went on Disability - Notice the jump in claims
after the
recession was allegedly long-over.
The timing
coincides with unemployment benefits expiring at 99 weeks. Supposedly
higher
taxes will fix the problem. I say “nonsense”.
View
multiple charts in this article, plus others, at Townhall Finance
|