Russ Roberts discusses the large increase in disability insurance rolls here, after having an EconTalk with David Autor, who has several recent papers on it.
I've been interested in this issue since taking my labor econ sequence at GW with Donald Parsons, who was one of the economists to draw attention to the impact of the program on labor supply in the early 1980s.
The impact on labor supply - especially for black male populations - is pretty clear, but what do we do about it? As far as I know the only major policy move since the 1980s has been to tighten up the program. So government largesse doesn't seem to be driving the increased use trends that Russ is observing.
Unfortunately, I expect disability insurance is just a release-valve for problems that have nothing to do with welfare and that start in the labor market. Low labor market opportunities discourage workers. Those workers still need to support themselves. AFDC/TANF is a possibility for women with children but disability is the outlet for men.
So yes, we could continue to tighten the screws on disability insurance - but that risks hurting the people that actually need it and dumping a lot of labor on a market that isn't employing it. A better response, I think, would be to get more serious about sub-national full employment policy. We as a country hadn't really talked in terms of full employment before the Great Recession, and for obvious reasons. But even though the country as a whole has been doing fine, there are sections of the countr that have been mired in a depresion of their own for decades now.
In other words, the causality might run from labor demand to labor supply, to disability insurance.
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