How Work-Limiting Health Shocks Affect Employment and Income

Research Report

How Work-Limiting Health Shocks Affect Employment and Income

Abstract

Many workers who experience a new health shock or develop a new functional limitation can manage their condition and continue working. Others, however, are forced to stop working. While data are readily available on how many people qualify for Social Security Disability Insurance and other forms of public assistance each year, less is known about those who leave the workforce and neither receive any public assistance nor view themselves as retired.

To explore challenges faced by this group of workers, we used data from the 2005-2015 waves of the Panel Study of Income Dynamics (PSID). We find that each year, on average, 4.2 percent of adults age 18 to 62 who are in the labor force report developing a new work-limiting health condition or experiencing a new health shock.  Within two years, these workers are three times more likely to have left the labor force than workers who did not experience a health shock. More than half of them do not receive any form of public assistance and do not report being retired. Within six years, over one-third of this group is still not receiving any public assistance. The number of full-time workers who develop a new work-limiting health condition and are living in poverty almost doubles within two years following the onset of their health issue. Those who do receive some form of public assistance are more likely to see their incomes stabilize while those who do not receive benefits see their economic status erode.

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