Reform Federal Disability Insurance to Help Address Wisconsin’s Labor Shortage

Subjective criteria, work disincentives plague disability insurance program

The Problem: With unemployment at record lows, Wisconsin’s central economic challenge is a labor shortage. 76% of Wisconsin business leaders report trouble finding workers. At the same time, more than 10 million Americans, 160,000 Wisconsinites, receive Social Security Disability Insurance (SSDI) benefits. Almost all SSDI beneficiaries are permanently out of the workforce.

The WILL Solution: A new report, Untapped Potential, makes the case that federal disability insurance is in urgent need of reform. To boost labor force participation and help states like Wisconsin address their workforce needs, Congress should embrace federalism and allow states the opportunity to innovate to reform disability insurance.

Diving Deeper

  • Despite no changes in self-reported health and disability among the working-age population, disabled worker enrollment in SSDI has grown from 3 million in 1990 to a peak of 9 million in 2014. Current enrollment is 8.6 million.
  • SSDI, and its counterpart program Supplemental Security Income (SSI) cost nearly $200 billion per year – more than the combined federal spending on food stamps, unemployment insurance, and housing subsidies combined.
  • More than half of all SSDI enrollments do not qualify on medical evidence alone.
  • A lengthy application process and steep benefits cliffs serve to keep SSDI beneficiaries from labor force participation.

The Bottomline: A labor market with adequate jobs and rising wages is the perfect opportunity to reform disability insurance. And if Washington won’t fix it, it ought to allow states that need workers the opportunity to take on the challenge. For disabled workers that can be retrained or rehabilitated, there are real opportunities to contribute. As it stands, too much human potential is being sidelined at too high of a cost.

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