The Impact of Unemployment Insurance Extensions on Disability Insurance Application and Allowance Rates

53 Pages Posted: 22 Mar 2013

See all articles by Matthew S. Rutledge

Matthew S. Rutledge

Boston College, Center for Retirement Research

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2013

Abstract

Both unemployment insurance (UI) extensions and the availability of disability benefits have disincentive effects on job search. But UI extensions can reduce the efficiency cost of disability benefits if UI recipients delay disability application until they exhaust their unemployment benefits. This paper, the first to focus on the effect of UI extensions on disability applications, investigates whether UI eligibility, extension, and exhaustion affect the timing of disability applications and the composition of the applicant pool. Jobless individuals are significantly less likely to apply to Social Security Disability Insurance (SSDI) during UI extensions, and significantly more likely to apply when UI is ultimately exhausted. Healthier potential applicants appear more likely to delay, as state allowance rates increase after a new UI extension. Simulations find that a 13-week UI extension decreases SSDI and Medicare costs, offsetting about half of the increase in UI payments; this suggests that the benefits of UI extensions may be understated — permanent disability benefits are diverted to shorter-run unemployment benefits and, potentially, new jobs, while easing the burden on the nearly insolvent SSDI Trust Fund.

Suggested Citation

Rutledge, Matthew S., The Impact of Unemployment Insurance Extensions on Disability Insurance Application and Allowance Rates (March 1, 2013). US Census Bureau Center for Economic Studies Paper No. CES-WP-10, Available at SSRN: https://ssrn.com/abstract=2236173 or http://dx.doi.org/10.2139/ssrn.2236173

Matthew S. Rutledge (Contact Author)

Boston College, Center for Retirement Research ( email )

Boston, MA
United States

HOME PAGE: http://crr.bc.edu/researchers/matthew_s_rutledge.html

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