The Labor Market Consequences of Receiving Disability Benefits during Childhood

Abstract

This paper estimates the labor market effects of gaining eligibility for Supplemental Security Income (SSI) disability benefits during childhood. In theory, access to SSI could help children treat their disabilities, thus improving labor market outcomes in the long run. Alternatively, children who are designated as disabled may reduce their investment in human capital, which would harm future labor market outcomes. I identify the effects of qualifying for SSI benefits through a natural experiment-a Supreme Court decision eased the criteria to be considered disabled, especially for children with mental disorders. The policy change also occurred earlier in some people's lives than others. For individuals with a mental disorder, each additional year of exposure to eased standards during childhood increased their SSI receipt by 0.3 years and reduced cumulative labor market earnings through age 30 by $1,600. Importantly, this does not address the full range of outcomes that may be affected by receiving benefits. The author is grateful to Prashant Bharadwaj, Julie Cullen, Gordon Dahl, and Craig McIntosh for being so generous with their time and for many helpful discussions. I am extremely thankful to Jeffrey Hemmeter and John Jones at the Social Security Administration, who helped run programs and set me up with data access at SSA, and without whom this paper would not have been possible.

Supplemental Security Income and Child Outcomes: Evidence from Birth Weight Eligibility Cutoffs

“…7 In related work, researchers have shown that receiving SSI as a child influences labor supply outcomes later in adulthood. Deshpande (2016b) finds that removal of a child from SSI at age 18 significantly reduces own future income and increases income volatility, and Levere (2017) 6 labor market and economic outcomes, it is not yet known whether SSI for low birth weight infants affects child development or other family outcomes during early childhood.…”

How does losing health insurance affect disability claims? Evidence from the Affordable Care Act's dependent care mandate

“…Although some young adults might seek SSI primarily for the Medicaid coverage, SSI awards also provide cash payments that can add up to substantial expenditures for the federal government, particularly for young adults (Riley & Rupp, 2015). SSI receipt may also discourage work and weaken beneficiaries' human capital over the long term (Levere, 2019). Providing additional stand‐alone options for health insurance to young adults might better meet their need for help in managing the costs of a disabling condition, while increasing their self‐sufficiency.…”

“…However, disability benefits programs also have work disincentives, as beneficiaries with sufficiently high earnings eventually lose eligibility. The receipt of benefits, and even the application process itself, can reduce earnings and employment (Maestas et al., 2013; Gelber et al., 2017; Autor et al, 2015; Levere, 2019).…”

“…Almost two‐thirds of that amount was tied to Medicaid and Medicare expenditures. The potential to receive benefits for so long means that young adults also may experience the most substantial losses in human capital as a result of the programs' work disincentives (Levere, 2019).…”

A Roadmap to Reducing Child Poverty

“…Since lower birth weight infants should, all else equal, have more delayed motor skills than infants with higher birth weights, these results are especially consequential. Levere (2015) takes advantage of a second source of quasi-experimental variation in SSI coverage, in this case occasioned by the 1990 Sullivan v. Zebley Supreme Court decision, which broadened SSI coverage for children with mental disabilities. Children with mental health conditions who were younger when Zebley was handed down became eligible for more years of SSI support than older children.…”