By Phil Izzo
2,820,812: The number of applications for Social Security Disability Insurance in 2012.
The number of people applying and getting approved for disability benefits hit multiyear lows in 2012, a potential sign of an improving labor market.
Last year some 2.8 million people applied for Social Security Disability Insurance, the lowest level since 2009, and about 980,000 approvals were issued, the lowest level since 2008. Historically, both numbers remain elevated and are likely to continue to be high as the average age of SSDI applicants is about midway through the Baby Boom generation.
There has long been a link between high unemployment and rising applications for disability. A 2011 report from the White House noted that as many poor Americans reach the end of their unemployment benefits, they apply for disability benefits.
Applying for benefits doesn’t mean automatic approval, of course. About 33% of applications in 2012 were approved, down from more than a 50% approval rate in 1998. Part of the lower rate is attributable to a backlog in the system. Many applications made in 2012 still haven’t been decided. But the lower rate could also be affected by workers seeking benefits because they see no alternative.
But the decline could be an indication of better conditions in the jobs market. Though 2012 wasn’t exactly a gangbuster year for employment, the economy did manage to add about 1.8 million jobs and the unemployment rate declined more than half a percentage point to 7.8% over the course of the year.
The drop in applications in 2012 likely is a positive sign for the labor market. There have recently been indications that unemployed workers are re-entering the labor force as hiring conditions improve, meaning that discouraged workers aren’t turning to disability benefits. That also is occurring even as unemployment benefits expired for more out-of-work Americans. About 2 million Americans were receiving payments through federally backed emergency unemployment programs at the end of 2012, down from more than 3.5 million at the start of the year.
If the labor market improves further in 2013, as expected, it could be good news for the SSDI program that has been under increased pressure since the recession hit. Last year, the Social Security and Medicare Boards of Trustees projected the disability trust fund would be exhausted as soon as 2016, two years earlier than was projected just one year prior. That’s because even though new applications and approvals are lower, the total number of recipients is steadily growing. There were a total 8.8 million people receiving SSDI benefits in 2012, and though the rate of increase may slow, the number isn’t likely to drop soon. Once someone starts receiving disability, they often continue for life.