RISING U.S. DISABILITY COSTS
September 27, 2007
Americans are living longer and are healthier than previous generations, yet the number of workers receiving disability benefits is increasing. In fact, disability is the fastest-rising component of Social Security, growing at nearly twice the rate of spending on retirement benefits, says the National Center for Policy Analysis (NCPA).
Social Security pays disability benefits to individuals who are unable to work due to injury or illness. The disability program has been growing much faster than Social Security as a whole. According to the 2007 Social Security Trustees Report:
- From 1985 to 2006 the number of disabled beneficiaries more than doubled from 3.9 million to 8.4 million, whereas the number of people receiving old age benefits grew less than 25 percent.
- Over the same period, annual expenditures for disability benefits grew five-fold, while old age expenditures grew less than three-fold.
- Disability benefits previously constituted only 10 percent of total Social Security spending, but now they are 17 percent of the total.
Why are U.S. disability claims rising? One reason is that older workers have an incentive to use disability as a form of early retirement. Currently, 72 percent of workers claim retirement benefits before reaching their normal retirement age and therefore receive a smaller monthly check. By contrast, a 62-year-old worker can claim disability and receive monthly benefits that are about 30 percent higher than his or her early retirement benefits, says the NCPA.
Source: Pamela Villarreal and D. Sean Shurtleff, "Chile's Answer to Rising U.S. Disability Costs," National Center for Policy Analysis, Brief Analysis No. 594, September 27, 2007.
Browse more articles on Tax and Spending Issues