My project here is to estimate how many US workers would drop out of the labor market or reduce their work hours if the US had a Universal Basic Income (UBI). In this and the last post, I've been focusing on individuals who apply for federal disability benefits. How many individuals denied disability benefits are actually able to work and of these, how many would actually work or maintain their work hours if they were guaranteed a UBI of, say, $1200? First, some background.

More than 14 million Americans between 18-64 receive either Social Security Disability Income (SSDI) or Supplemental Security Income (SSI) - a share of US adults that has skyrocketed over the last five decades. The main qualification for these benefits is the inability to perform “substantial gainful activity”, basically any job anywhere in the nation that generates at least $1170 a month ($1950 if blind). It doesn’t matter whether a specific job vacancy exists.

The growth of SSDI/SSI beneficiaries has partly to do with relaxed eligibility requirements. For instance, in the olden days, conditions related to the musculoskeletal system and connective tissue were less likely to be considered serious enough to meet the disability threshold for federal benefits; now they've become the largest category of disability, about a third of all diagnoses.  Disability benefits also have greater economic value than before, worth a bigger chunk of what low-skilled jobs pay, with the added bonus of Medicare or Medicaid eligibility.

So how could we estimate the number of SSDI/SSI applicants and beneficiaries who are able to work but hope to qualify for benefits so they won't have to? One thing we could do is to look at the ratio of benefit applicants to benefit awards.

Easy: the ratio is about 7 to 3.  Over the past decade, a bit over 30% of SSDI/SSI applications have been approved per year, on average.  While some of those initially denied benefits will subsequently receive awards upon appeal,  the award rate doesn't vary much from year to year. That leaves us with roughly 70% of SSDI and SSI applications that are never approved.  Thus, the 14 million working-age adults currently on SSDI and SSI represent about 30% of a multi-year applicant pool of approximately 46.6 million. That leaves 32.6 million unsuccessful applicants: individuals who don't want to work but whose documented disability doesn't meet the federal threshold for SSDI or SSI. 

For the sake of simplicity, I will assume that all adults of working age who currently receive SSDI or SSI are actually unable to work. I will also assume that 80% of working-age adults who applied for but were never awarded SSDI or SSI have returned to work in some capacity.  That translates to about 26 million* US workers age 18-64 who might choose not to work if they could receive a guaranteed UBI of $1200 or so a month. Twenty-six million, out of civilian employment of 154 million. In other words: 17% of  current US workers.

Now let's add those 26 million to another group of almost the same size whose willingness to work may waver under UBI scheme: part-time workers. In a previous post, I noted that 18% of US workers are part-time, a large majority of whom are part-time workers by choice, meaning they're not interested in full-time work. Many are students. Few cite illness or disability as a reason for working part-time. 

With a UBI, how many part-time workers would choose to continue working at all? Some, for sure. But many are working part-time because they are busy with school or children and part-time work is enough to meet their bills; a little over half are secondary wage earners in their household. If a UBI were enough to meet their bills, would they continue to work part-time?

Even part-timers who report wanting to work full-time may become less motivated to do so if they were also to receive a UBI.  That's because many of these  "involuntary part-timers" have limited skills, education, and earnings potential: a profile similar to a lot of applicants for federal disability benefits. When looking at a lifetime of low-paying jobs, full-time work just isn't as enticing when the government is already sending you a monthly UBI check.

So how many workers in today's labor market would choose not to work or work fewer hours if they got a UBI?  We've already got 35% (17%+18%) who are good candidates: rejected applicants for SSDI/SSI who are currently working, plus part-time workers. Let's just guess low: divide that figure in half, make it 17.5%, and call it a day.

But this isn't the end of the story: rejected SSDI/SSI applicants and part-time workers are just a subset of the US labor force whose motivation to work might change should they received a UBI. More to come.

* 26 million = .8 x 32.6 million, about 17% of the current US employed (.17 x 154 million). Add to this the 18% of US employed who are working part-time and you've got 35% combined.

Next: Possible consequences of lower labor market participation under a UBI system.

Reference:

Mark Duggan, Scott A. Imberman “Why Are the Disability Rolls Skyrocketing? The Contribution of Population Characteristics, Economic Conditions, and Program Generosity” in Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly (2008), David M. Cutler and David A. Wise, eds. National Bureau of Economic Research (p. 337 -  379).  http://www.nber.org/chapters/c11119