Factors Affecting Initial Disability Allowance Rates for the Disability Insurance and Supplemental Security Income Programs: The Role of the Demographic and Diagnostic Composition of Applicants and Local Labor Market Conditions

Article excerpt

Various factors outside the control of decision makers may affect the rate at which disability applications are allowed or denied during the initial step of eligibility determination in the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs. In this article, using individual-level data on applications, I estimate the role of three important factors-the demographic characteristics of applicants, the diagnostic mix of applicants, and the local unemployment rate-in affecting the probability of an initial allowance and state allowance rates. I use a random sample of initial determinations from 1993 through 2008 and a fixed-effects multiple regression framework. The empirical results show that the demographic and diagnostic characteristics of applicants and the local unemployment rate substantially affect the initial allowance rate. An increase in the local unemployment rate tends to be associated with a decrease in the initial allowance rate. This negative relationship holds for adult DI and SSI applicants and for SSI childhood applicants.

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The probability of an initial disability allowance among Disability Insurance (DI) and Supplemental Security Income (SSI) applicants is affected by numerous factors at individual, state, and national levels. That includes demographic and diagnostic characteristics of applicants (age, sex, and type of impairment), national policies, local factors such as the state unemployment rate, and the implementation of disability determination policies by state Disability Determination Services (DDSs). In this article, I focus on the role of key factors that are outside of the direct control of DDS management in affecting initial allowances. I also discuss implications for the understanding of variations in state initial allowance rates.1

Three of the most important factors believed to affect the probability of an initial allowance are (1) demographic characteristics of applicants, (2) the diagnostic mix of applicants, and (3) local labor market conditions. Existing descriptive statistical tabulations of initial determination results summarize the association of those variables and the initial allowance rate, but are not designed to isolate the independent effect of those factors. More is known about the causal effect of labor market shocks on the allowance rate. Consistent with previous studies (discussed in the next section), I use fixed-effects multiple regression analysis. The fixed-effects model controls for state- and/or year-specific effects. This nonexperimental methodology allows the estimation of the relationship between the dependent variable (initial allowance rate) and the independent variables of interest net of long-term differences among states and changes in national policies affecting each state. Because of the use of individual-level data on applicants, I can look at the relationship between my indicator of local labor market conditions-the unemployment rate-and the initial allowance rate, considering a level of detail on applicant characteristics (for example, age and diagnostic category) that has not been feasible in previous work that was based exclusively on state-level data. Because in this study (as in all related analyses) the nature of the evidence is nonexperimental, caution is warranted in causal interpretation.

There are a number of reasons for expecting a relationship between labor market conditions, disability applications, and the initial allowance rate. Adverse labor market conditions are expected to bring in marginally qualifying or marginally interested applicants or affect the timing of application following disability onset. Adverse labor market conditions may result in job loss or decreased access to full-time, part-time, or irregular job or work opportunities.2 Those changes typically hit people with disabilities the hardest. Thus, people in the process of disablement may apply for disability benefits earlier than they otherwise would. …


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