From working to applying: Employment transitions of applicants for disability insurance in the United States

Policies that reduce applications for disability insurance by improving employment prospects of people at risk of applying could be an effective way to control the costs of such programmes. Yet little is known about whether potential applicants would respond to such policies. This paper uses administrative records merged with the Survey of Income and Programme Participation to document employment transitions preceding applications for Social Security Disability Insurance (DI) in the US. Most future applicants report a health shock shortly before they stop working, but they typically remain out of work for some months before they apply for DI. Classifying episodes of non-employment by beginning events reveals that spell length, job search, Unemployment Insurance participation and DI application processing time differ notably by reason of job loss. These findings suggest that applicants generally do not apply immediately after job loss and that those not directly affected by an illness or injury tend to consider other options before applying for benefits. Social policies aimed at increasing re-employment opportunities for such individuals could therefore be effective in reducing application rates.