(Disabled) Friends with Benefits

This American Life did an in depth story about disability benefits that has been stuck in my head since I listened on Friday. The number of people collecting disability benefits has been increasing for years. Even during the last couple of economic booms the number kept going up. Are we getting sicker and more frail? Is it widespread fraud?

The answer is actually a lot more complicated.

In Hale County, AL 25% of the residents are legally disabled. The knee jerk reaction that is a widespread scam turn out to not be accurate. Hale County is a rural, economically depressed area populated mostly by people of limited educational backgrounds. As the town doctor explains when interviewed, it's not that these people are incapable of working at all, which is what I think most of us think of when we hear "disabled." The issue that they are uneducated and after 30 years of manual labor for a living, their bodies are shot. Their backs are in constant pain, knees are bad, etc. He classified them as disabled because they are physically incapable of doing the work they are qualified to do, and the work that is available in their community. There are no desk jobs in Hale County. So the extremely high rate of disability is not due to something in the water or widespread fraud, it's a simple economic issue. If you can't do manual labor, you can't get a job there. Theoretically, if somebody put a call center in town many of these people might be able to work.

Another topic they touched on was kids bringing in disability money due to learning disabilities. The idea is that a special needs kid will require the parents to miss work more often so the payments help compensate. It's a classic example of the law of unintended consequences. Families get addicted to the extra money and it creates a disincentive to helping their children overcome their learning disability and succeed in school. The obvious fix is to replace cash payments to parents with government funded services to help the kids. However, in that case you create a bureaucracy that will have an incentive to keep the kids in the system as long as possible.

Another issue is welfare is a state system, disability is a Federal system. There are consulting companies that will crawl through the welfare roles for the states, finding reasons to move people from welfare to disability. There is an added bonus that disabled people are not counted for unemployment counting purposes. There were approximately 12 million people officially unemployed in February 2013. There are about 14 million that are officially disabled. I doubt anybody knows what percentage of the disabled are "economically disabled" versus truly incapable of performing some sort of productive work. If it's half though, the unemployment rate is really closer to 13% than the officially reported 8%.

Think about that for a second and what it means for the state of our economy.