This is one in a series of 15 two-page, evidence-based framing memos on pressing education and social issues prepared by MDRC for the incoming Obama Administration and the new Congress.

Bottom Line

The size and costs of the two largest federal disability programs, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), have increased dramatically in the last decade. Despite three decades of advocacy and legislation designed to expand employment opportunities for people with disabilities, the number who work has remained persistently low. With expanding federal deficits and new budget pressures, there is a compelling need to learn if more disability beneficiaries can work and reduce their dependence on cash assistance — without increasing poverty.

What Do We Know?

The two major federal programs that provide cash assistance for people with disabilities serve 11 million working-age recipients at a cost exceeding $100 billion a year. SSI provides means-tested income assistance to people over the age of 65 and to people under 65 who are blind or disabled. SSDI is the disability insurance program for working-age adults and their dependents. SSDI has no means test, but benefits are only paid if an individual has worked long enough in covered employment to be insured. The disability eligibility criteria are the same in both programs: to qualify for benefits, a disability must be permanent and severe enough to prevent someone from engaging in “substantial gainful activity.”

SSDI and SSI rolls have almost doubled in the last decade, and very few beneficiaries work. During the economic boom of the 1990s, when employment increased for almost all groups and welfare caseloads declined by half, work declined among people with disabilities, their poverty rates went up, and the number of SSDI and SSI beneficiaries almost doubled. There are competing theories about the reasons behind these trends. Whatever the explanation, it is unlikely the disability rolls will decline in the near future since very few beneficiaries of disability benefits work. Only about 7 percent of SSI beneficiaries work part time while receiving benefits, and less than 1 percent ever leaves the rolls. Employment rates among SSDI beneficiaries are even lower.

There is some evidence that people with disabilities can work — with the proper supports. Disability is not a static condition: many disorders abate, recur, and newly emerge. Some percentage of the SSDI caseload — estimates are as high as 75 percent — will experience some type of full or partial recovery during their spell. Limited evidence from evaluations of programs for people with disabilities suggests that employment rates can be increased in this population:

• Structured Training and Employment Services (STETS), a supported work program for mentally retarded youth tested in the 1980s, had impressive impacts on employment and earnings and was a major influence on policy and practice in the disability field for years.
  
  
• Individual Placement and Support (IPS), a work-first approach for adults with severe mental illness that relies on rapid placement in unsubsidized jobs coupled with postemployment supports and accommodations, had large effects on earnings and employment compared with other program models, including pre-employment training and transitional work.

• The Youth Transition Demonstration (YTD) targets youth and young adults with disabilities that are receiving SSI or at risk of entering the system. Among disadvantaged groups, youth with disabilities in low-income families have among the highest risks of dropping out of school, being unemployed as adults, and being incarcerated. Youth who continue on to SSI as adults are also likely to remain on assistance for many years. YTD provides intensive individualized job placement services and waives SSI rules that discourage work and education.
  
  
• The Accelerated Benefits (AB) Demonstration is assessing the impact on employment, health, and benefit receipt of allowing new SSDI beneficiaries without any health insurance to receive immediate health coverage, rather than waiting 24 months as they do under current rules. AB will also test whether adding employment counseling and rehabilitation services to the health benefit improves these outcomes.
  
  
• Other initiatives underway include a broader study of the effectiveness of the IPS supported employment model and a test of a financial incentive that will allow SSDI beneficiaries to continue to receive some benefits if they work.

What's Next?

While the strategies described above may hold promise, it seems unlikely that they will create significant change until the disability assistance system makes employment and self-sufficiency part of its core mission. But is it realistic to expect the disability system to encourage employment when eligibility for benefits is based on the inability to work? Are such changes affordable and will the public support them? And, even if the system changed its orientation, would it really be able to improve employment outcomes?

Welfare reform may offer some lessons. Not so long ago, most welfare administrators believed they had no control over how many of their clients found jobs. Once it was accepted that welfare programs could help recipients into jobs, the system had the impetus to align policies, operating practices, accountability systems, and staff incentives to promote these outcomes. But it would be a mistake to push the welfare analogy too far. Unlike people with disabilities, many welfare recipients had considerable work experience and capacity to build on. Nevertheless, it would be useful to test some reforms on a demonstration basis, including:

• Making part-time employment a performance measure for disability programs. If effectiveness were measured in part by the number of people who worked at least part-time, administrators might begin to make operational changes to promote those goals. Disability program staff might find better ways to market the work incentives that have recently been built into their programs. In turn, the disability system might encourage vocational rehabilitation and workforce development systems to focus more on helping people with disabilities find employment.
  
  
• Test a time-limited, temporary disability program. A two-tiered disability system could begin with a temporary program requiring beneficiaries to participate in rehabilitation, receive regular assessments, and prepare for reemployment. Those who demonstrate that they cannot work would become eligible for permanent disability benefits. This alternative model, which has been used successfully in Europe, would resolve the contradiction in the current system of expecting people to work who have proven they are permanently unable to work.

Key Resources

MDRC's Health and Disabilities Projects

Drake, Robert E., and colleagues. 1999. "Research on the Individual Placement and Support Model of Supported Employment." Psychiatric Quarterly 70,4: 289-301.

Kerachsky, Stuart, and colleagues. 1985. The Impacts of Transitional Employment for Mentally Retarded Young Adults: Results of the STETS Demonstration. New York: MDRC.