The Impact of the Great Recession on SSDI Awards: A Birth-Cohort Analysis

Awards of Social Security Disability Insurance (SSDI) benefits to disabled workers increased rapidly and then declined in the decade after the Great Recession began. We hypothesize that the recession initially accelerated awards to workers who would have worked longer and entered SSDI later had the economy remained stable, which in turn led to a drop in awards later in the recovery. We use administrative data from the Social Security Administration to construct counterfactual award series in 2008 through 2014 based on historical award growth, conditional on age, sex, and state. We compare the counterfactual award series to observed awards between 2008 and 2014 to see deviations between actual awards and projected awards based on historical trends. We estimate the cross-state relationship between these deviations and measures of how the business cycle evolved in each state from 2007 to 2016 to assess the extent to which the business cycle accounts for the rapid increase and later decline in awards. For men born between 1941 and 1986, declines in awards relative to the counterfactual from 2011 to 2014 roughly equal increases in awards relative to the counterfactual from 2008 to 2010. Cross-state variation in business-cycle characteristics account well for the overall pattern of the deviation between actual awards and the counterfactual. But estimates for male cohort groups, defined by birth year, are less consistent with the business-cycle hypothesis. Results for women are harder to interpret because the counterfactual series is based on a period of rapid growth in SSDI entry for women.

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