The Ability of Older Workers With Impairments to Adapt to New Jobs: Changing the Age Criteria for Social Security Disability Insurance

Abstract

Many applications for Social Security Disability Insurance cannot be evaluated based on medical criteria alone. In specific cases, the current regulatory structure dictates that applicants who can no longer do past jobs are expected to adapt to new jobs up to the age of 55, but not after. As the proportion of these cases has grown and life expectancy among beneficiaries has increased, policymakers have considered whether expectations for adapting to new jobs above age 55 should be adjusted. Some recent reform proposals call for increasing the age cutoffs in the regulations. Although prior research predicts reduced program costs, the capacity of potentially affected applicants to continue working is unclear. Filling this gap, we evaluate the work capacity of applicants above age 55 using an instrumental variables strategy. Our estimates indicate that, for applicants on the margin of allowance, at most an additional 11.2 percent would work above the regulatory definition of meaningful employment (known as Substantial Gainful Activity) in the absence of Disability Insurance benefits. We explore the implications for adapting to new jobs above age 55 under the proposed policy regime.