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By Reihan Salam http://www.nationalreview.com/agenda/344235/disability-and-economic-inclusion-reihan-salam Brad Plumer has an interview with Harold Pollack, a left-of-center social policy scholar at the University of Chicago’s School of Social Service Administration, discussing the issues raised by Chana Joffe-Walt’s reporting on Social Security disability insurance (SSDI), which we discussed earlier this week. Joffe-Walt relied heavily on the findings of MIT economist David Autor, a leading expert on SSDI and options for reform. There are a few passages of the interview that merit closer attention, e.g.: Brad Plumer: One of the big themes of the “This American Life” segment was that as the U.S. economy has slumped and jobs have vanished, disability insurance has essentially become the safety-net program of last resort. More people are now qualifying for disability than ever before — it now costs $260 billion per year. Is this really what the program is designed to do? Harold Pollack: These tensions go back to the very beginning of this program. It has always been a matter of deep controversy and anxiety about how to draw the boundaries between eligibility and non-eligibility. And the worry among fiscal conservatives has always been that it would become a backstop income guarantee for people who couldn’t find a job. If you go back to 1985 and look at Jerry Mashaw’s book “Bureaucratic Justice,” even then there’s an interesting account of how the agency has tried to deal with these problems, and how one can fairly and accurately make determinations for hundreds of thousands of applicants. It’s not feasible to stage an OJ-style trial for everyone who applies for disability, but you still want real and defensible standards for who qualifies and who doesn’t. But the program is also a lot more stringent than that “This American Life” piece would have you believe. The fact is, the vast majority of applicants are denied, and there are qualified diagnoses that are very stringently applied. One assumes that there is variation in the stringency with which SSDI eligibility rules are applied. Autor’s 2011 paper describes the scale of the increase in the inflow into SSDI, and how Congressional modifications to the program in 1984 greatly expanded eligibility. Robert Whitaker’s Anatomy of an Epidemic documents the increase the dramatic increase in the number of SSI and SSDI beneficiaries disabled by mental disorders over the past 25 years. Yet the award rate, i.e., the share of applicants who are eventually granted SSDI benefits, appears to have drifted downwards over the same period. It is the growth in the dominator, i.e., the number of applicants, that is truly alarming, particularly when considered in light of the reductions in the physical demands of the workplace. The number of adult applicants in 2010 was 2.8 million. The number in 2009 was also 2.8 million. The total number of SSDI beneficiaries is over 8.7 million. A less stringent regime, in which half of applicants were granted benefits, would grow at a truly astonishing rate. “Stringency” implies that most of the rejected applicants are marginal cases, who may well be physically incapable of doing any kind of work yet who’ve been rejected all the same. It is also possible, however, that as the fixed cost of employing workers increases and as the wage employers are willing to pay less-skilled workers remains stagnant or declines, large numbers of workers who might be capable of working yet who are not willing to do so for the market-clearing wage (understandably) are attempting to claim SSDI benefits and failing to clear the hurdle. BP: Now there’s another big concern that once workers qualify for disability, they leave the labor force altogether. They never work again. Is that a real worry? Is the disability program really luring away people who could work? HP: I don’t think so. One way to see this is to look at the employment rates for people who applied for disability but were then denied. And those are actually quite low, below 50 percent. That suggests we’re not pulling people out of the workforce who would otherwise be there. It’s also worth remembering that the adult benefits for disability are not that high. If people are leaving the labor market so that they can get $13,000 per year and health care because that’s better than anything that employers can provide, what does that tell you about the state of the economy? This doesn’t strike me as the right way to characterize the problem. That the labor market position of less-skilled workers has deteriorated is a given, and it’s an issue Autor has addressed at length. The concern isn’t so much that the disability program is “luring away people who could work,” as disability benefits are indeed very modest. Rather, it is whether or not there are alternative strategies that might generate higher rates of labor force participation, hence Autor and Mark Duggan’s work on building a “front-end” for SSDI in the form of private disability insurance designed to help disabled individuals remain in the workforce. Other strategies might include an expansion of low-wage employment subsidies, e.g., increasing the earned-income tax credit for low-income workers without dependent children. My view is that we need to think much harder about how we deploy resources to households in the bottom tenth of the income distribution. If we take the fact a large amount of money is going to be spent as a given, whether in the form of direct transfers, medical benefits, crime prevention efforts, or other social services, we could start thinking about how to deploy these resources to help individuals achieve self-sufficiency and upward mobility. This frame will tend to reveal, I suspect, that “expensive” measures like low-wage employment subsidies might actually be cheaper than the alternatives. This is why the conservative anti-poverty agenda ought to focus on the idea of “economic inclusion,” i.e., finding ways to include the marginalized poor in mainstream economic institutions, including large employers.