The Disability Screening Process and the Labor Market Behavior of Accepted and Rejected Applicants: Evidence from the Health and Retirement Study

Abstract

This paper uses Social Security earnings records linked to data from the Health and Retirement Study to examine the labor market behavior of rejected and accepted disability applicants prior to their application. We find that rejected applicants have substantially lower earnings and labor force participation rates during the decade prior to application than beneficiaries. Also, we find some evidence of a divergence between these groups, with rejected applicants leaving the labor force at a faster rate than beneficiaries as their application date approaches. One interpretation of these results is that the disability screening process on average separates those who are at least partially motivated by adverse economic circumstances when applying for disability benefits from other applicants.

Asset accumulation and labor force participation of disability insurance applicants

“…The overall acceptance rate is around 72.5%, 14 comparable to other studies that use the HRS to study SSDI and SSI applicants (Benitez-Silva et al, 1999, 2004Giertz and Kubik, 2011).…”

“…Like Giertz and Kubik (2011) and von Wachter et al (2011), I find that rejected applicants show significantly less attachment to the labor force immediately before application. According to Table 1, about 39% of rejected applicants report being at least partially retired at the time of application, compared to only 34% of accepted applicants.…”

“…SSI pays stipends to low-income individuals who are 65 or older, blind, or disabled. 5 Giertz and Kubik (2011) find similar results using HRS data to compare the labor-force participation of rejected and accepted applicants. But they do not study asset accumulation or test a model similar to mine.…”

“…Previous studies that used the HRS do not distinguish between SSDI and SSI applicants (Benitez-Silva et al, 1999, 2004Giertz and Kubik, 2011). SSDI does not have an asset test, but many applicants also apply for Supplemental Security Income (SSI), which imposes a limit on "countable resources" such as cash and bank accounts.…”

Rejection from the Disability Insurance Program and Dependency on Social Support

“…Similar tests were performed for the older cohort sample and in all cases the null hypothesis cannot be rejected. While this is the first study to examine social support outcomes, other studies using earnings and labor force participation have gone as far back as ten years, and have shown there is no interaction yet with the DI application (Giertz and Kubik, 2011;Von Wachter et al, 2011;Song, 2004). Song (2004) in his study of the earnings of DI applicants contends that "pre-disability earnings appear to be the most suitable because they are ... determined years before the earliest application.…”