Economic Conditions and Supplemental Security Income Application

IntroductionOver the last 30 years, the Supplemental Security Income (SSI) program, which provides federally funded income support for individuals with disabilities, has become one of the most important means-tested cash aid programs in the United States. In 2015, SSI provided payments to 4.9 million low-income adults aged 18-64 who met its disability criteria (Social Security Administration [SSA] 2017a, Table 7.A1). That figure represents a doubling in the adult SSI caseload since 1990 (Chart 1). The federal government spent $46.9 billion on payments to SSI recipients with disabilities in 2015 (SSA 2017a, Table 7.A4), representing a 155 percent increase in real dollars since 1990.1Because SSI is a means-tested program, one might expect application trends to be countercyclical-decreasing when the economy is expanding and increasing during recessions. However, the cyclicality of application has varied over time. Chart 2 graphs SSI applications for adults aged 18-64 (leftaxis) against the unemployment rate (right axis) for 1990-2015. For most of the period-from 1990 through about 2002 and from 2008 to 2015-the trend in SSI application followed the trend in the national unemployment rate fairly closely. For example, the steady decline in SSI application in the 1990s began about 1 year after the unemployment rate began to decline; SSI application increased as unemployment rates rose during the Great Recession of 2008-2010 and application declined during the subsequent recovery. However, the 2003-2007 period presents an anomaly: Although the unemployment rate fell, SSI application continued to rise. Rutledge and Wu (2014) offer a number of explanations for the continuing rise in applications during that period, including the lagged effects of prior welfare reforms that induced Temporary Assistance for Needy Families (TANF) program participants to switch to SSI, persistently high poverty rates, and increases in the share of the population in fair or poor health.A number of previous studies looked at the effects of economic conditions on growth in disability program caseloads. However, much of that work focused on Social Security Disability Insurance (DI), which is limited to individuals who meet that program's earnings-history thresholds and who therefore may be more responsive to economic conditions. Most research focusing specifically on SSI dates from the 1990s. Those studies found that higher unemployment was associated with increases in SSI application and caseloads (Rupp and Stapleton 1995; Stapleton and others 1998; Stapleton and others 1999). The relationship between economic conditions and SSI application may have evolved significantly since then. Given rapid growth in the SSI rolls and the slow pace of recovery from the Great Recession, understanding the role that business cycles play in determining SSI participation has become increasingly important.In this article, we examine the relationship between economic conditions and working-age adult SSI application from 1996 through 2010 using data from the Survey of Income and Program Participation (SIPP) linked to SSA's 831 data file. These restricted-access data allow us to link detailed SIPP information on demographic conditions and unemployment spells with precise SSA records on the month of first application for SSI and DI benefits. Using hazard models, we estimate SSI and DI application risk among individuals who were working when first observed in the SIPP but were unemployed during follow-up surveys in their respective SIPP panels, and examine the effect of the unemployment rate both at the time of job loss (the baseline rate) and at the time of-that is, contemporaneous with-SSI application. Whereas the contemporaneous measure reflects local labor market conditions at the time of application, the baseline rate may reflect differential characteristics of the pool of unemployed workers related to the business cycle. Our results suggest that application risk increases significantly with higher contemporaneous state unemployment rates. …