Disability Onset Among Working Parents

Abstract

This paper examines work-limiting disability using the 1996 and 2001 panels of the Survey of Income and Program Participation. Nearly 10 percent of employed parents developed or had a recurring disability over the course of the panel. For about a quarter of this group, earnings dropped by more than 25 percent of family income, with other income sources offsetting only a small fraction of lost earnings. In addition, workers who hold health insurance policies through their employer were less likely to reduce hours worked or leave their job following disability onset, effects consistent with job lock.

Introduction

As part of a larger project examining how families with children respond to large drops in family income, this paper focuses on income losses associated with the onset of a work-limiting disability. As defined in this study, self-reported work limitation (hereafter referred to interchangeably as "disability" or "limitation") is a broad measure that could include both temporary and permanent health problems of variable severity. The effect of this disability on a worker's earnings will likely depend on several factors, including the severity and duration of the disability, whether the job's demands or work environment can be altered to accommodate the limitation, and whether the worker has access to paid leave to recover from a temporary illness. This paper first examines the prevalence and severity of earnings drops associated with the onset of a work-limiting disability, then focuses on the effects of any related earning decreases on the worker's family, both in family income and health insurance.

The financial effect of a worker's disability on his or her family depends on the size of the worker's earnings drop and the presence of other income sources that could buffer such a drop. Several income sources could buffer reduced earnings. Some families are able to increase the hours other family members work or draw on assets to offset an earnings loss (Wu 2003). Some employers offer disability benefits, activated when disability first occurs, to replace a portion of lost earnings. According to data from the National Compensation Survey, 39 percent of workers in private industry in 2007 had access to short-term disability coverage through their employer, and 31 percent had access to long-term disability coverage. These benefits were more likely to be offered to employees with higher wages; about half of workers had access to short- and long-term disability benefits (U.S. Department of Labor 2007). Programs funded through employer taxes, such as unemployment insurance (UI) and workers compensation, may also be available, depending on whether the worker ceases working a ltogether and whether the disability occurred on the job. Workers at very small firms maynot have access to unemployment benefits, however, because regulations exempt some small employers from participating in the UI system.¹ Some agricultural workers and domestic workers may also be outside the workers compensation system.²

For families with incomes below certain thresholds, state or federal means-tested benefits may also offset earnings losses from disability onset. These benefits include Temporary Assistance to Needy Families, food stamps, and Women, Infants, and Children (WIC)—a program that gives food vouchers to pregnant women and families with children under age 5 with low incomes.

Finally, if a worker's disability is expected to be long lasting, he or she can apply for Supplemental Security Income (SSI) and/or disability insurance through the Social Security program. To qualify for these programs, workers must pass a strict earnings test as well as a test of the severity of disability. Neither program provides short-term benefits, since by definition workers must show that their conditions are expected to last at least one year (Szymendera 2005).

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