Disability May Account for Some of Shrinking Workforce

Economists suggest the large number of people leaving the workforce could be partially tied to an increase in approvals for Social Security Disability Insurance.

While the jobs report released on Friday showed the unemployment rate fell to 7.6 percent, it also revealed that the workforce shrunk by 496,000 in March. Economists are looking at other contributing factors that could explain the drop, according to the Wall Street Journal.

Michael Feroli, the chief U.S. economist for J.P Morgan, estimates that a quarter of the drop in the workforce can be blamed on workers qualifying for disability insurance.

In 2012 alone, 8.8 million workers and 2.1 million of their dependents received disability insurance totaling $137 billion. The figure exceeded related 2012 Medicare costs for the same group, which totaled $80 billion.

The problem with disability insurance is that there is no limit on how long you can collect it, as opposed to unemployment benefits.

“It’s not like other support programs, such as unemployment insurance, which you lose after a year or two,” Feroli told the Journal.

David Autor, a professor at the Massachusetts Institute of Technology, also told the newspaper that the disability rolls reflect the fear that the contracting workforce may become permanent, especially since many of those joining the disability roster are low-income workers who are “pretty unlikely to want to forfeit economic security for a precarious job market.”

Typically, when a recession ends, workers who have left the workforce start to return. But since the recession ended in 2009, not only has the workforce not expanded, it has continued to contract. According to recent reports from the Labor Department, only 63.3 percent of the nation's adult workforce is actually working.