WI20-03: Social Security Disability Insurance (SSDI) and Intergenerational Economic Mobility

Abstract

Access to economic opportunity in the United States is not uniform. In addition to heterogeneous mobility patterns by race/ethnicity and geography, new research suggests children whose parent(s) have work-limiting health conditions also experience lower economic mobility. Since Social Security Disability Insurance (DI) is designed to mitigate adverse economic consequences of work disability by monthly cash transfers, this study investigates whether this policy may also mitigate observed lower economic mobility for beneficiaries’ children. Using common measures of intergenerational economic mobility, this study examines economic mobility along two margins: 1) parents’ self-report of work-limiting health conditions, and 2) parent DI application history. Data come from the Survey of Income and Program Participation (SIPP) matched with Social Security Administration data. Children of parents with work limitations on average have 4.1 percentiles less upward mobility from the 25th percentile of parent income and 4.3 percentiles more downward mobility from the 75th percentile of parent income relative to children whose parents do not report work-limitations. Children’s economic mobility ought to decrease with declining parent health unless DI helps shapes outcomes. Using the SSA’s 5-step Disability Determination Process, parents initially awarded DI are hypothesized to have the worst health while parents initially denied (but later accepted) likely have marginally better health. Despite worse parent health, children of initial DI awardees have 3.6 percentiles more upward mobility relative to peers of parents who are initially denied benefits, suggesting DI may moderate economic mobility in the population.