Macroeconomics

Does a worker choose not to work when collecting Social Security?

Campaigns against social security usually claim that Social Security Benefits discourage workers from being employed. Many right wing policy advocates point their fingers at Social Security Benefits as being expensive and further making the labor force lazy – to say the least. In this article I analyze to what extent the number of unemployed people is determined by the number of people collecting Social Security Benefits given out by disability claims. That is, workers’ own disability; workers’ spouse disability; and, workers’ children disability. I use the term workers because, in spite being disable, I assume they are willing to work. Thus, the argument from the right would be that people readily available to work will remain unemployed whenever they can secure an income from the Social Security Administration. Furthermore, workers will do so too before the scenario in which their spouses collect benefits. And third, workers will not work in the case in which social security benefits are being collected for their children. In other words, workers would rather take care of the disable children or spouse and live out of public transfers. Then, the question that possesses this analysis is the following: does a worker choose not to work when collecting some form of Social Security Benefit for her family?

Social Security and Unemployment levels.

Social Security and Unemployment levels. By Catherine De Las Salas (Summer 2015).

The data:

So, by looking at the correlation between number of unemployed people and number of people claiming benefits for the above mentioned three reasons, I am able to capture the “willingness” of disable workers, whom are collecting social security benefits, to work. I take data at the United States county level from the U.S. Social Security Administration database which contains the number of beneficiaries by type of benefit. Also, I take observations pertaining to the number of people claiming benefits for disability reasons. In addition, I take the number of unemployed people at the county level (data from the U.S. Bureau of Labor Statistics). Both data correspond to 2014. The only counties excluded from the sample are the ones at U.S. Virgin Islands. All other counties, and independent cities are included in the sample regression.

One could argue, correctly, some sort of multicollinearity in the data since people collecting benefits usually do not work. However, unemployment statistics from the Bureau of Labor Statistics interestingly count as unemployed persons those who have looked actively for a job during the recent past weeks of the application of the survey. This means that what the unemployment statistics is capturing here is the “willingness” of disable people to work while collecting social security benefits. Given that the answers to BLS Household Survey data have no conditional effect on social security benefits, it is reasonable not expect the survey to be corrupted by the interest of keeping the benefit on the beneficiaries’ end. In other words, in spite of the statistical identity, data can be further interpreted given the nature of the question being asked by BLS Household Survey.

Results:

What I found at the county level is that as the number of disable workers rise by 2.9, the number of unemployed persons do so by one. This is an obvious outcome of the effect that disabilities have on the labor market. So, this should not surprise anyone. However, what turned out to be interesting is the fact that disable people collecting social security benefits are counted as unemployed. This basically means, to some extent, that disable people are “willing” and actively looking for jobs. Although the logic is counterintuitive at first glance, it may reveal something thought-provoking. On one hand, if the person is disable to work, and at the same time collecting social security benefits, such a person should not be looking for a job. But, what the data show is that they actually, and actively, looked for a job despite their condition. Although interpretations have to be carefully examined, either disable persons are cheating the system, or they are just eager to be incorporated to the labor market. Further, given the statistical significance at 95% confidence level for all of the estimated coefficients, there is little room for concluding the variation is due to sampling error only.

Likewise, unemployment levels are affected by workers’ disable spouses. For every increase of roughly 46 people collecting benefits for their spouses, there is a unit increase in the number of unemployed people. Clearly, having a disable spouse does little discouragement for the worker to work. Finally, unemployment levels decrease with increases of disable children. That is, disable children make workers look for jobs eagerly. As the number of disable children increases by 10.5, the number of unemployed people drops by one.

One obvious limitation of the analysis is the type of disability that beneficiaries may have, which certainly mediates the “willingness” of the disable person to work. Nonetheless, some narrow conclusions can be drawn from this regression. First, even though disable people get support from social security, it does not translate necessarily in quitting the labor force, which means neither disabilities, nor public transfers make them lazy. Also, data show that paying for a disable children encourages parents to work.

Regression Output, Social Security Benefits and Unemployment levels

Regression Output, Social Security Benefits and Unemployment levels

 

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