The Minimum Wage and Social Security Disability Insurance
Several factors influence the decision to apply for benefits from the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs, which provided valuable benefits to over 16 million individuals in June 2020. In this study, we examine how changes in the minimum wage affect the number of applications to both programs. We leverage changes in the effective minimum wage across states and over the 2000-2015 time period and control for changes in the unemployment rate, other county-level demographic covariates, county- and yearfixed effects, and county-specific linear time trends to control for underlying differences across areas in application rates and their growth over time. While the effect of the minimum wage is positive and statistically significant in our main specification, the effect is economically small: a one dollar increase in the minimum wage increases the total application rate for SSI and SSDI combined by 0.04 percentage points. We find more robust evidence for a relationship between the unemployment rate and the application rate; the effect of a one standard deviation change in the unemployment rate is approximately three times as large as a one standard deviation in the minimum wage.
We would like to thank Benjamin Wittenbrink for exceptional research assistance and Manasi Deshpande for helping us access SSDI and SSI application data. The research reported herein was performed pursuant to grant RDR18000003 from the US Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA, any agency of the Federal Government, or NBER. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.