Disability in the United States

This is Joseph.

The New York times had a very nice article on social security disability insurance.  Of especial note were:

If people on disability were faking it, they wouldn’t have such high death rates. People on disability are three to six times more likely to die than people in their age group who are not on disability.

and:

Disability claims are not skyrocketing. Rather, the population most likely to go on disability, those aged 50 to 64, is growing. The potential disability population is also larger now than in the past because today’s older women are more likely to have worked enough to qualify for disability than in earlier generations.

These points suggest that increases in disability claims are much less of a point of concern than one might think.  An elevated death rate is a pretty strong indicator of morbidity and it is impossible to fake.  Nor do I think an increased level of workforce participation (making it possible for more people to be eligible for benefits) is bad news. 

I don't want to minimize worries about fraud, but there are times when there is unlikely to be a lot of low hanging fruit. 

Retirement age

I missed this issue when it was raised about a month ago but it is a rather good point:

Raising the retirement age is a strange prescription for countries suffering from mass youth unemployment. When I made that observation on twitter the other day, I got a lot of pushback from people accusing me of a "lump of labor" fallacy. But please note, I didn't say that countries suffering from mass youth unemployment should lower the retirement age. What I said is that if you have a country -- Greece, say, or France -- where youth unemployment is very high, it's strange to decide that raising the retirement age is the cure for your economic woes.

I am also always a touch mystified as to why this policy prescription is quite so popular to deal with actual economic crises.  It is not that you cannot set the retirement age too low (you sure can), but that it does seem counter-productive to always seek to increase it when there is a shortfall in demand and high unemployment.  Does it make sense to pump out money to people who can spend it (retirees) and generate new employment among the young (who produce services to the retirees). 

What I think I really want to see is some sort of evidence that the existence of retirement programs hurts national productivity in an important way.  What is the alternative?  Can people really work into their late sixties and early seventies across a wide range of professions? 

Plus, these programs allow us to have experiments in other programs -- like a 401(k) plan -- without leaving people destitute if they prove to be bad policy.  In this sense, social security acts as a sort of innovation insurance, to allow us to try and improve retirement programs.  That seems like a feature to me. 

Easily worth a thousand words... Maybe even fifteen hundred

From Mark Thoma.