Modernizing the SSDIEligibility Criteria: Trends in Demographics and Labor Markets Affecting Workers in the “Grid”

Presentation by Mark J. Warshawsky, Ph.D.to

SSA National Disability ForumWashington, D.C.

November 20, 2015

Background

• Social Security Disability Insurance program outlays have increased rapidly, roughly doubling in real terms over the past

fifteen years. • Participation in program (as % of labor-force) has

doubled over the past twenty years. • Determining the cause of this rapid rate of

growth is essential for setting the program on a sustainable, long-term responsible path.

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Disability and Workforce Composition

• The increased take-up of disability benefits amongst insured population may seem intuitive with aging workforce.

• But Burkhauser et al (2014) and Kaye (2013) have shown that actual workforce and elderly disability prevalence rates have remained flat or fallen over past four decades.

• Moreover, even after adjusting for long-expected changes in age and gender composition of the labor force, program take-up has increased significantly in recent years.

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Vocational Grid

• Over time, a greater percentage of awards have been decided with consideration of vocational factors: age, education (including language ability), and experience.

• In the context of award process, this means that a growing percentage of claims are awarded at

step five, the “vocational grid.”• A growing percentage of awardees do not have

conditions in the listing of Impairments (or of equal severity); vocational consideration allows for lesser severity of disability.

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Source: Annual Statistical Report on the Social Security Disability Insurance Program, 2013. 6

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percentage Distribution of Reasons for SSDI Al-lowance, 1992-2010

Other Medical and vocational factors consideredEquals level of severity of listingsMeets level of severity of listings

Econometric Evidence

• The ease of SSDI applicants to obtain awards if they are in the grid can also be shown by formal analysis.

• Rupp (2012) uses a random sample of 1,736,554 disability determinations made during the 1993-2008 period to determine the probability of award by age, controlling for area of residence, medical diagnosis, year, etc. He finds that the probability of initial award spikes past age 50.

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Modern Relevance of Grid Criteria• The vocational factors considered for the “grid” are based

on the supposition that older workers, poorly educated workers, etc. need a “break” because of external labor market conditions or because it is more difficult for them than otherwise similarly situated, somewhat disabled, workers to adjust.

• But conditions in the labor market have changed considerably since the rules’ creation in the 1970s , which based on even earlier experience.

• Technological advances also mean that some disadvantages once deemed worthy of consideration by SSA should have much less weight in awarding DI benefits.

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Changes in Labor Force Over Time

• Since the creation of the vocational grid, the labor force has largely moved away from manual, labor-intensive occupations and toward managerial and service-sector jobs.

• Over the past twenty years alone, the share of “sedentary occupations” has risen from 42% to 56%, according to BLS.

• Moreover, even production jobs are less physically demanding.

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Changes in Life Expectancy

• Since the experience underlying current vocational rules, life expectancy has lengthened considerably.

• A male fifty-year-old in 1960 could expect to live for 23 more years, while his male counterpart in 2010 could expect 29.6 more years. Life expectancy for female fifty-year-olds increased from 27.7 to 33.2 during this period.

• The grid designation of age 50 as “closely approaching advanced age” is almost laughable.

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Rise of Educational Attainment• Rules on education reflect an era where college was

exception, not norm, and high school completion was far from universal.

• High-School diploma attainment has nearly doubled over past fifty years; four-year degree completion has tripled.

• Grid’s focus on “limited education”- those with less than 12th grade education- also fails to take into account rise of vocational programs, rise of substitutes to traditional education.

• Think about Bill Gates and Steve Jobs, both of whom did not finish college.

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19641966

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20122014

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Educational Attainment, 25 Years and Over, 1964-2014

At Least Four Years of HSAt Least Four Years of College

Perc

ent o

f Pop

ulati

on

Source: U.S. Census Bureau, Current Population Survey. 13

Relevance of Language Ability

• Rules granting leeway to poor-proficiency English speakers come from an era where American workforce almost universally spoke English; “language late-comers” were punished in the labor market.

• This has changed; foreign-born composition of work-force has more-than tripled since 1970.

• Immigrants with poor English tend to self-select into large ethnic enclaves (Bauer et al, 2002), where English proficiency has little/no relationship with earnings (Hwang et al, 2010).

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1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0

2

4

6

8

10

12

14

16

18

Foreign-Born Workers as Percentage of Labor Force, 1970-2014

Perc

ent

Source: U.S. Bureau of Labor Statistics. 15

Changes in Labor Force Participation• Labor force participation among adults 55 and over is on a

thirty-year-upward trend, in contrast to the stable-or-declining participation of all other age groups. Participation for the 55+ group has increased by roughly a third since 1985.

• Even as increased educational attainment is pushing the age of initial entry into the labor force later and later, adults are disengaging from the labor force later as age-related maladies become more manageable.

• Policy changes such as the liberalization of Social Security’s retirement earnings test, older NRA, and the widespread switch to defined contribution plans have also been behind the trend toward later retirement.

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19701971197319751977197919811982198419861988199019921993199519971999200120032004200620082010201220140.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Labor Force Participation by Age Group, 1970-2015

16-1920-2425-3435-4445-5455 and Over

Perc

ent

Source: U.S. Bureau of Labor Statistics. 17

Recommendations

• Grid criteria of age, education, and language ability should be eliminated.

• Sole focus should be on the residual functional capacity; disability examiners should determine if applicant can do any job in the national economy.

• Alternatively, some slight consideration could be given to age, but this should be done in tandem with conversion of all disability benefits into retirement benefits at ERA (age 62).

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