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Unemployment and the Disability Dilemma

Posted by Steve Markowitz on September 11, 2012

Economist John Mauldin on September 8 posted an article titled Debt Be Not Proud.  Mauldin reviews a variety of issues relating to debt, unemployment and the likelihood of still more Federal Reserve intervention into the economy.  As this Blog has proffered in the past, the President’s Stimulus Package and the Federal Reserve’s QE1 and QE2 failed to bring about a real recovery for the economy.  It’s naïve to think that next round would be any more successful.

Mauldin posted a graph (included below) that shows the dismal employment numbers as a percentage of the total available workforce.  That participation rate is now at about 63%, it’s lowest figure in decades.  At the same time, while the Labor Department’s unemployment figures released last week were also dismal, the unemployment rate actually dropped to 8.1%.  It is remarkable that the American people and mainstream media seems to ignore this governmental sleight-of-hand.

One reason that the unemployment rate does not match reality is that when people stop looking for jobs they are no longer considered unemployed by the Labor Department.  Now that’s a remarkable piece of accounting!

A subcategory of the unemployed not counted as unemployed by the Labor Department are those Americans on disability.  This number has risen dramatically in recent years with Mauldin quoting the following:

  • There are currently about 9 million Americans on disability.
  • In the last three years, about 5.4 million people have been added to the disability rolls.  Even this number is understated with some moving from disability to Social Security.  If these people were actually considered unemployed, it is estimated that the unemployment rate would increase by about 2% to over 10%.
  • In the early 1990s one American was on disability for every 35 workers.  That rate has more than doubled with it now being one of every 16 workers.  The second chart below graphically shows this trend.

In searching for an explanation for the increasing number of Americans on disability, Mauldin quotes the Congressional Budget Office (CBO) that stated: “When opportunities for employment are plentiful, some people who could quality for [disability insurance] benefits find working more attractive … when employment opportunities are scarce, some of these people participate in the DI program instead.”  Assuming the CBO is correct, this is one piece of anecdotal evidence that shows the abuses occurring with America’s disability programs.  The rate of disability should not change based on the strength of the economy.

It is interesting to view the increasing disability numbers in light of all of the programs and medical treatments available for Americans that 30 years ago were not.  American workers are more “protected” than ever by governmental organizations such as OSHA, the Labor Department, and various medical programs and therapies.  To conclude that the increase in disabilities are in fact real and not caused by abuses of the system, then we would also have to conclude that these governmental programs have not only failed, but were counterproductive to American’s health.

 

 

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