About one-third of the workforce has twice the risk of disability as the other two-thirds. So what drives these people to work in such risky occupations? And how does this affect the Social Security Disability Insurance (SSDI) program?
Economist David Wiczer of the St. Louis Fed and Assistant Professor Amanda Michaud of Indiana University in Bloomington examined these questions in an article in The Regional Economist. Using the University of Michigan Health and Retirement Study, they grouped workers by their primary lifetime occupations, then computed the fraction who reported some difficulty with one of the Activities of Daily Living (ADLs) during their working life before age 65.1
Wiczer and Michaud found that most workers belonged to a group that had low disability rates. However, another group of occupations had workers who were twice as likely to have had some disability. The table below shows samples of risky and safe occupations.
Wiczer and Michaud noted that those in high-risk occupations were more likely to apply for and receive SSDI. In fact, 21 percent of the workers in riskier occupations received SSDI benefits versus 12 percent from other occupations.
The authors found that workers in riskier occupations, while less educated than those in safe occupations, were paid relatively well. After controlling for education and other demographics, workers in risky occupations made $5,000 more per year compared with workers with similar education and demographic characteristics.
However, these workers also had lower savings than those in safer occupations. Wiczer and Michaud noted, “From the perspective of a simple theory of precautionary savings, this was puzzling: If workers in certain occupations faced a much higher risk of disability, with its corresponding loss of income and increased expenses, we would expect them to save a larger fraction of their income.”
They offered one potential explanation that people in risky occupations may simply put a higher value on their current welfare, which would explain two aspects of this puzzle if true:
The authors noted that understanding the reasons that people work risky jobs is important for the design and assessment of the SSDI program:
Ultimately, Wiczer and Michaud concluded that more research is needed: “Although the rolls of those receiving disability benefits have been rising quickly, we do not have a good benchmark for what should be their optimal size, nor do we know the effects of the availability of disability insurance on individuals in the job market.”
1 ADLs are basic self-care activities such as eating, bathing, dressing and walking across a room.
