The Employment Effects of Terminating Disability Benefits

Abstract

Few social security disability insurance (DI) beneficiaries return to the labor force, making it hard to assess their likely employment in the absence of benefits. Using administrative data, I examine the employment of individuals who lost DI eligibility after the 1996 removal of drug and alcohol addictions as qualifying conditions. Approximately 22% started working at levels that would have disqualified them for DI, an employment response that is large relative to their work histories. Those who received DI for 2–3years had the largest response, suggesting that a period of public assistance may maximize the employment of some disabled individuals.