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Wednesday, October 21, 2015

'Rising Disability Payments: Are Cuts to Workers’ Compensation Part of the Story?'

A summary of a new paper by Nick Buffie and Dean Baker (as they are careful to note, the results are preliminary):

Executive Summary There has been a large increase in the number of workers receiving Social Security Disability Insurance (DI) over the last quarter century. While most of this increase is explained by well - known demographic factors, such as the growing number of women in the workforce and the aging of the baby boomers, there is considerable concern that workers are increasingly choosing to collect DI benefits as an alternative to working. This concern has figured prominently in the debate over plans to maintain full funding for the DI program beyond the projected DI trust fund depletion date in late 2016.1,2

This paper examines the extent to which cuts in state workers’ compensation (WC) benefits may have contributed to the rise in DI awards. To some extent, these programs may be seen as alternative sources of support for workers with job - related injuries. Insofar as injured workers are less able to receive WC benefits, they may be more likely to turn to the DI program.

At the national level, there is a clear correlation between the sharp decline in WC benefits over the last quarter century and the rise in DI benefits. This paper examines whether there could be a causal relationship between the reduction in WC benefits and the rise in DI benefits by examining state - level data.

It finds:

  • In a variety of specifications , there is a strong relationship between the decline in state - level WC beneficiaries and rise in new DI awards. This suggests that people are turning to DI because they are le ss able to collect WC benefits.
  • A test of whether the rise in DI awards by state can be explained by policy changes to the state WC program found some evidence of a relationship. Given the difficulties in capturing the policy changes in the relevant variable, this is strongly suggestive that the rise in DI benefits was in part the result of state - level policy decisions to make WC programs less generous.
  • These estimates suggest that more than one - fifth of the rise in the number of workers receiving DI awards can be explained by cuts to WC programs. These results are preliminary.

We expect to conduct further tests of the relationship between WC and the DI program, but the results in this analysis strongly suggest that cuts in the former have led to increases in the latter. ...

    Posted by on Wednesday, October 21, 2015 at 10:54 AM in Economics, Social Insurance | Permalink  Comments (22)


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