“It takes a couple of years for these folks to become eligible for the Social Security Disability Insurance program, at which point they have been out of the job market for a long time and usually without prospects.”
More than 56 million Americans live with a disability.
The unemployment rate among this population is staggering — 11.1 percent in 2016 for prime working age (25 years to 54 years old) individuals, compared with just 4 percent of the total prime age population.
Perversely, policies created to help those with a disability survive financially, and find work, unintentionally inhibit their ability to maintain work and actually incentivizes impoverished living. Experts are pushing for changes to the system that would allow disabled workers to keep more of the federal disability benefit while they work to encourage more gainful employment.
The stories are all different, but the result is often the same. They are working, develop a disability or were working with one that’s worsening, then can’t work for a long period of time. It takes a couple of years for these folks to become eligible for the Social Security Disability Insurance program, at which point they have been out of the job market for a long time and usually without prospects.
Now if they want to return to work, they must think about the “cash cliff” — the point in which their SSDI begins to diminish as they earn more at their job. The cash cliff is formally known as the substantial gainful activity threshold, which is $1,170 per month in 2017. When earnings exceed this threshold, by even one dollar, after a nine-month period called the trial work period, the entire SSDI cash benefit may be suspended and beneficiaries can be terminated from the program.
Most experts find this a barrier to employment.
“There are serious disincentives to going back to work here,” said John O’Neill, director of disability and employment research for East Hanover, N.J.-based nonprofit Kessler Foundation. “The Social Security Administration has been tinkering with work incentives for years and it’s a good thing they’ve recognized this, but for so many, changes aren’t coming fast enough. Allow people to offset a portion (of the benefit) and participate economically by allowing them to keep more of their (disability) checks.”
Consider this: John Doe, 46, was an nonunion factory line worker earning $16/hour plus overtime before developing a debilitating spinal condition — let’s say spinal stenosis (it hurts). With the occasional overtime, Doe earned about $37,000 annually.
Assuming the average SSDI benefit of $1,171 per month, Doe earns $14,052 annually on disability, plus any additional benefits such as supplemental security income. If Doe finds employment, possibly a less physical job that allows him to sit and earn $10/hour at 40 hours per week, he could earn a total of $34,852 for nine months while receiving SSDI while working, if my back-of-the-napkin math holds up.
But after the nine-month trial work period, Doe is removed from the SSDI program. His income then plummets to $14,052 plus any fringe disability benefits.
So what should Doe do?
A savvy worker would seek lesser employment, right? Go to part-time. Earn less than the threshold of $1,170 per month. He either needs to find a full-time job that pays $6.74/hour that will earn him $14,028, plus the $14,052 in SSDI for an annual income of $28,080 or a part-time job that allows him to stay below the threshold.
Just as welfare incentivizes the poor to remain in depressed regions with few public services, SSDI forces disabled workers to seek fewer and lower-paying employment opportunities.
The long-standing SSDI program, which currently serves nearly 9 million American workers as well as almost 2 million of their dependents, is also facing roughly $70 billion in cuts over 10 years under the White House’s budget proposal.
The legislative fix should be simple. Allow workers with disabilities to continue to draw upon SSDI while they work for a longer period of time with a sliding scale as their work income increases. A plan offered by the Bipartisan Policy Center in 2015 suggested starting the phaseout of benefits at a $700 threshold, reducing one dollar of benefit for every two dollars earned.
By now you’re asking why the government would prop up these workers on the taxpayer dole for longer. Taxes are the answer. Someone finding gainful employment at higher wages pays more in taxes — where someone on SSDI earning borderline poverty wages is paying either nothing or next to nothing to the federal government. Incentivizing work for people with a disability means they’re paying more into the system that provides them benefits.
“SSDI is a big drain on the system and the disincentives are enormous,” O’Neill said. “This is all part of the Gordian knot that is benefits, but there are solutions that benefit both the government and people with disabilities.”