Academic journal article Social Security Bulletin

How Common Is "Parking" among Social Security Disability Insurance Beneficiaries? Evidence from the 1999 Change in the Earnings Level of Substantial Gainful Activity

Academic journal article Social Security Bulletin

How Common Is "Parking" among Social Security Disability Insurance Beneficiaries? Evidence from the 1999 Change in the Earnings Level of Substantial Gainful Activity

Article excerpt

Fewer Social Security Disability Insurance (DI) beneficiaries have their earnings suspended or terminated because of work than those who are actually working, partly because beneficiaries "park" earnings at a level below substantial gainful activity (SGA) to retain benefits. We assess the extent of parking by exploiting the 1999 change in the SGA earnings level from $500 to $700 monthly for nonblind beneficiaries using a difference-in-difference analysis that compares two annual cohorts of beneficiaries who completed their trial work period, one that was affected by the SGA change and one that was not. Our impact estimates, along with results from other sources, suggest that from 0.2 to 0.4 percent of all DI beneficiaries were parked below the SGA level in the typical month from 2002 through 2006. The SGA change did not yield any difference in mean earnings, although it did result in a small reduction in months spent off of the rolls because of work.

Introduction

The Social Security Disability Insurance (DI) program was designed to support qualified individuals who are unable to engage in "substantial gainful activity" (SGA) because of a medically determinable physical or mental impairment that is expected to result in death or last for at least 1 year.1 Growth in the DI rolls in recent decades has been substantial; from 2000 through 2007 alone, the number of disabled-worker beneficiaries increased by approximately 2 million, to more than 7 million beneficiaries (SSA 2008). Autor and Duggan (2006) documented some of the reasons for this rapid expansion: aging of the labor force, growing percentages of women who meet the program's work history requirements, changing eligibility criteria, rising value of the Medicare benefits for which DI beneficiaries attain eligibility after 24 months on the rolls, and rising after-tax DI replacement rates for low-wage workers.

In addition to the rising number of people who receive DI benefits, employment rates among beneficiaries have been declining over the years. Employment among working-age people with disabilities is significantly lower than that for those without disabilities; in 2008, 39 percent of those with disabilities worked, compared with 77 percent of those without disabilities (Census Bureau 2009). This differential has not improved in recent decades, and in fact, seems to have worsened (Weathers and Wittenburg 2009). Further, relative to other workers, those with disabilities are increasingly likely to be employed on a part-time rather than full-time basis (Hotchkiss 2004). It appears that employment rates for successive cohorts of DI entrants after program entry were quite stable for those who entered from the mid-1980s through the 2000s (Von Wachter, Song, and Manchester, forthcoming), but it also appears that there was a decline in employment for those entering the DI program during and after the 2001 recession (Liu and Stapleton 2011).

Once workers enter the DI program, a substantial minority returns to work, but a much smaller share leaves the rolls because of work. In each year, the number who leaves the rolls is minimal, but over time, more beneficiaries do ultimately have their benefits terminated because they are working. For instance, of those who received their DI awards in 1996, 28 percent had annual earnings of at least $1,000 in 1 or more of the next 10 years, but only 6.5 percent had their benefits suspended for at least 1 month because of work, and only 3.7 percent had their benefits terminated because of work (Liu and Stapleton 2011).

One reason that the percentage of beneficiaries who have their earnings suspended or terminated because of work is far lower than the percentage who return to work might be because of "parking." Parking occurs when beneficiaries intentionally keep their earnings at a level below SGA to avoid loss of their DI benefits. If beneficiaries engage in SGA-in essence, earn more than $1,000 a month for nonblind and $1,640 for blind beneficiaries in 2010-for a sustained period of time, they risk losing their DI benefits (described in more detail later). …

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