The impact of changing financial work incentives on the earnings of Social Security Disability Insurance (SSDI) beneficiaries

Abstract

SSDI beneficiaries lose their entire cash benefit if they perform work that is substantial gainful activity (SGA) after using Social Security work incentive programs. The complete loss of benefits might be a work disincentive for beneficiaries. We report results from a pilot project that replaces the complete loss of benefits with a gradual reduction in benefits of $1 for every $2 earned above an earnings disregard level. Beneficiaries who volunteered to participate in the project were randomly assigned to a group receiving the new program or to a control group. The policy led to a 25 percent increase in the percentage of beneficiaries with earnings above the annualized SGA amount, or $11,760 in 2009 dollars. It did not result in a reduction in benefit payments.

Making Disability Work? The Effect of Financial Incentives on Partially Disabled Workers

“…Moreover, the limited and insignificant effects that we find for the incentive change on full work resumption indicate that partially disabled workers preferred supplementing their partial DI benefits by wage earnings to being fully employed while receiving wage earnings only. This is in line with analyses of Campolieti and Riddell (2012) for Canada, and Weathers and Hemmeter (2011) for the US, who conclude that earnings disregards lead to employment effects but not to increases in exits from SSDI.…”

“…*/** indicate significance at 5%/1%, respectively. avoid exceeding income thresholds (Campolieti and Riddell, 2012;Weathers and Hemmeter, 2011;Bütler et al, 2015). Table 4 presents the estimation results of the linear probability model for full work resumption.…”

“…We add to a strand of literature that addresses the effects of financial work incentives on workers who are enrolled in DI schemes. For recent studies in this field, see Kostol and Mogstad (2014), Campolieti and Riddell (2012), and Weathers and Hemmeter (2011).…”

Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design

“…Campolieti and Riddell (2012) find that the introduction of an annual earnings exemption of CAD 3,800 in Canada increased disability beneficiaries' propensity to work, but did not influence program inflow or outflow. Weathers and Hemmeter (2011) find that a pilot project in the U.S. that replaced the notch at the SGA threshold with a gradual reduction in benefits led to a 25 percent increase in the number of beneficiaries with earnings above the SGA amount. Kostol and Mogstad (2014) also document that financial incentives in Norway's DI program increased earnings and disposable income of beneficiaries.…”

“…Empirical evidence is provided by Schimmel et al (2011); Weathers and Hemmeter (2011);Campolieti and Riddell (2012); Kostol and Mogstad (2014) (discussed in detail below). notch design, as opposed to a kink design, is the ability to estimate a structural elasticity because a notch creates a region of strictly dominated choices on the high-earnings side of the SGA threshold.…”