The Americans with Disabilities Act of 1990, ratified 23 years ago last month, is based on what was then a radical idea: that the physical and social environment people with disabilities face is as much responsible for their inability to fully integrate into society as their health-based impairments. But despite the improvements mandated by the ADA, the employment rate of working-age Americans with disabilities (aged 16-64) hit an all-time low of 14.5 percent in March 2012 (latest number available) — by comparison, it was 28.6 percent in March 1990 and 18.7 percent in March 2007, just before the Great Recession.
Congress must recognize that this precipitous drop in employment is not the result of an increase in the severity of work limitations or of growing discrimination in our society. Rather, it is the unintended consequence of their failure to reform Social Security Disability Insurance — a program that discourages Americans with disabilities from working. Despite the physical and environmental benefits obtained by the ADA (which created a physical and social environment geared to fully integrate disabled Americans into society) SSDI forces individuals to prove they are unable to work before providing them with the assistance needed to return to work. And even then, many disabled Americans are reluctant to re-engage in work for fear that their health coverage and benefits will be lost if their work efforts fail. It is bad policy, and Congress must reform it.
SSDI reached an enrollment peak of 8.85 million in March 2013. This represents a 21 percent increase since the start of the recession in 2007 and worsens a long-term SSDI growth trend: Since the mid-1980s, the percentage of working-age adults enrolled in SSDI has doubled. Demographic changes account for 56.2 percent of this increase: more women entering the workforce, the growing total population, the aging of the baby boomers, all result in more individuals needing the program’s support.
The remaining 43.8 percent consists of individuals who, with different interventions and incentives, might have continued productive employment but are instead discouraged from working by the law of the land.
Instead of receiving accommodation and rehabilitation when it is most effective, immediately after becoming disabled and unable to work, these workers face a slow SSDI approval process that, with appeals, can take years to resolve. By then, the workers are so removed from work that re-entering the workforce becomes an even more daunting task. While SSDI does provide a measure of economic security through income support and health coverage, it can’t generate the social and mental-health benefits strongly associated with employment. Those with impairments who continue to work tend to fare better from both a quality of life and financial perspective than those who must rely on SSDI.
SSDI’s structural flaws don’t help employers solve the problem either. SSDI is currently financed through a flat 3.2 percent payroll tax for companies and their employees. The tax rate is fixed and is not based on how many companies’ employees go onto the SSDI rolls: Regardless of whether 1 percent or 15 percent of company X’s workers enroll in SSDI, company X pays the same tax. As a result, firms are not encouraged to provide the workplace accommodation and rehabilitation to get their employees back to work. It is cheaper for them to help their workers onto SSDI and hire someone to replace them.
On the 23rd anniversary of the ADA, Congress should reaffirm its commitment to removing social barriers for people with disabilities by comprehensively reforming SSDI’s flawed structure. Shifting the SSDI payroll tax to an experience rated system along the lines of state workers compensation would more closely assign to employers the costs of their workers coming onto SSDI. Under such a system, employers would pay higher tax rates if their employees come onto the SSDI beneficiary rolls at higher than average rates. This would encourage employers to engage with private disability insurers to more actively support workers at the onset of a work impairment. The result would be more accommodation, more rehabilitation and a substantial decrease in SSDI enrolment.
Such “work first” policies have been successful in other countries. The Dutch now require employers to provide accommodation to workers who become impaired. The government also requires these employees to make a good-faith effort to return to work. Only after these work-first requirements have been met are workers who fail to return to work considered for disability benefits. Those reforms have both improved the employment rates of Dutch citizens with disabilities and slowed their enrolment onto the disability rolls.
SSDI provides a critical safety net for Americans whose impairments prevent them from working. But its incentive structure pushes away from employment many who could work. This reverse encouragement deprives many impaired Americans of the social, economic and mental-health benefits that working provides. The failure to adjust this outmoded incentive structure to one more in keeping with ADA principles is now a major barrier to the employment of Americans with disabilities. Congress should act soon.
Richard V. Burkhauser is the Sarah Gibson Blanding professor of policy analysis at Cornell University and an adjunct scholar at the American Enterprise Institute.