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Michael Bernick
Adjunct Fellow; Counsel to Duane Morris LLP; former Director, California Employment Development Department California, Human Capital, Labor
California and Human Capital and Labor
Michael Bernick, the former director of the California labor department, the Employment Development Department (EDD), joined the Milken Institute in February 2004, as a research fellow, focusing on job creation and workforce development projects.
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The exploding disability rolls in California
By: Michael Bernick
March 15, 2012
   
   
Considerable attention has been given over the past few years in California to the increase in Unemployment Insurance (UI) recipients, and the corresponding insolvency of the UI fund. In the December 2011 survey week, the number of UI recipients stood at 536,442, up very slightly from the previous month and down from 599,221 in December 2010.

At the same time, there is another benefit program in California for unemployed workers that has grown far more rapidly than UI over the past decade, and today has a greater number of unemployed Californians. This is the Social Security Disability Insurance program (SSDI). SSDI has received little or no publicity in the California press or attention in state government. However, in 2010 there were 622,232 unemployed Californians receiving SSDI. Total monthly benefits totaled $722,734,000 with an average monthly amount of $1090.40.

SSDI is a federally-funded program that provides benefits to working age adults who are determined to be unable to work. It was established in 1956 to extend coverage of Social Security to include not only retirees (who had been covered since the 1930s) but also workers with physical injuries or too ill to work. For its first two decades, SSDI was a relatively modest program. From 1989 through 2009, though, the number of adults, 25-64 years of age, receiving SSDI doubled from 2.3 percent of all workers to 4.6 percent. In 2010, 8.2 million adult workers were unemployed and on the SSDI rolls nationwide.

The most complete studies of SSDI and its growth have been undertaken by Professor David Autor of MIT. In a recent paper, "The Unsustainable Rise of the Disability Rolls in the United States", Professor Autor discusses the dynamics of the rapid growth of SSDI -- growing even as the rate of disability among working age adults remained stable and even as the number of physically dangerous jobs declined. He reviews the past efforts to move persons off SSDI into work, and their very limited impacts.

There have been several major attempts to reverse the growth of SSDI, the most prominent of which has been the Ticket to Work program enacted by Congress in 1999. Ticket to Work represented the best thinking of the Clinton Administration on reducing the disincentives to work in SSDI. Ticket to Work permitted SSDI beneficiaries to work for up to nine months without losing benefits, and to continue to receive Medicare eligibility for up to eight years. Still, it failed to make a dent in SSDI rolls. As Professor Autor reports, "fewer than 1400 tickets (0.01 percent) of 12.2 million tickets issued in the first seven years of the program led to successful workforce integration."

In recent years, Ticket to Work has been altered to allow recipients to keep a larger share of their earnings. Ms. Dee Gavaldon, One Stop Center site supervisor in Sacramento, notes that this Benefits Offset has improved the program's reach, as has the payment of providers upon placement milestones. But this program reach remains minimal, especially in the soft California job market.

As Professor Autor explains in an e-mail earlier this week, "Ticket to Work (TTW) comes too late to be relevant for most. By the time workers have enrolled in SSDI and qualified for TTW, their work-readiness has substantially diminished. Although a significant minority of SSDI claimants participate to a limited degree in the labor force, there are very good reasons for them not to participate to such an extent as they would lose eligibility. The SSDI benefit is akin to an annuity; it's a guaranteed monthly income stream that lasts until death or retirement … This income stream is indexed to inflation and includes Medicare, the value of which is rising at many multiples of the rate of inflation. It's hard to want to give up this benefit for the sake of uncertain (and typically low) labor force earnings."

Given the other California state budget issues, SSDI likely will continue to be given little attention. SSDI does impact the state budget in that around a third of SSDI recipients receive state supplemented SSI benefits, and access to Medi-Cal. But SSDI does not have the direct state budget impacts of, say, UI and CalWORKS.

Still, the SSDI growth in California should not go unnoticed. It is one more indication of our state's movement toward accepting a growing part of the adult population on benefit programs.