Social Security Disability Rolls Headed For Collapse

America’s unemployment rate has come down significantly from its peak of 10 percent in late 2009. That may seem to suggest a steady improvement in the employment picture, but the impression is misleading.

We recently pointed out that workers age 25 to 54 are experiencing a jobs depression that has gotten slightly worse since the end of the Great Recession of 2007-2009, with nearly all job growth since the downturn’s end coming among older Americans. But also statistically concealing the dire reality are labor force dropouts. A smaller percentage of Americans now work or seek work than at any point since the Carter era. Jim Pethokoukis, of the American Enterprise Institute, has calculated that if labor force participation had not declined so much since Obama took office, the unemployment rate for January would have been 10.8 percent.

What happens to the workers who drop out of the labor force? Some retire, some become full-time parents, some go on welfare. But here’s an important answer that is often overlooked: In 2011, on average, one net person has been added to Social Security’s Disability Insurance rolls (and 3.3 to its retirement program) for every five net new jobs created. Since 1970, the number receiving DI has grown sixfold (from 1.4 million to 8.8 million), and the program expenses have grown tenfold, which is unsustainable. The federal government now spends more on disability than food stamps and welfare combined. In 2009, DI began paying out more in benefits than it took in from payroll taxes. By 2016, it is set to run out of money.

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