Disability System Sorely In Need Of Reform

Armen Hareyan's picture
Advertisement

Disability System

The number of workers receiving disability in the U.S. is growing so rapidly that these benefits are now the fastest rising component of Social Security spending -- growing at nearly twice the rate of retirement benefits, according to a new analysis from the National Center for Policy Analysis (NCPA). In a separate study also released today, the NCPA says Chile's disability system costs less than half of the U.S. system -- 1.8% of payroll in the U.S. versus 0.7% of payroll in Chile -- and provides more generous benefits.

Advertisement

"Older workers often have an incentive to use disability as a form of early retirement," said NCPA President John Goodman. "In Chile, the incentive is to keep working."

The NCPA concluded that the disability system has been growing so fast in part because of perverse incentives. For example:

-- According to the Social Security Trustees, the number of disabled beneficiaries more than doubled, from 3.9 million in 1985 to 8.4 million in 2006, whereas people receiving retirement benefits grew less than 25 percent over the same period.

Advertisement