How do Economic Conditions Affect Earnings and Return to Disability Programs for Beneficiaries whose Benefits were Terminated?

We explore how economic conditions affect the labor supply and subsequent program participation of Social Security Disability Insurance (SSDI) beneficiaries and Supplemental Security Income (SSI) recipients whose benefits were ceased due to medical improvement after a Continuing Disability Review (CDR). We link publicly available data on economic conditions (specifically, the unemployment rate) to administrative records from the Social Security Administration (SSA) and leverage variation in economic conditions across states and over time to explore the association between economic conditions at the time of benefit cessation and labor supply outcomes. While a large body of prior work has examined the effect of economic conditions on entry into disability programs, little is known about how economic conditions affect outcomes of those who involuntarily exit SSDI or SSI due to medical improvement. This information could be useful to SSA in developing policy solutions to support individuals who leave SSDI or SSI due to medical improvement in their re-entry into the labor market. We find that economic conditions have a modest impact on post-cessation outcomes. For former SSI-only recipients, a one percentage point increase in the unemployment rate reduces annual earnings by approximately 4 percent during first three years after benefit cessation, increases the likelihood of re-applying to any disability benefit program by 1 percentage point, and increases the likelihood of returning to SSI by 0.6 percentage points (or 2.5 percent). We find a similar pattern of results for former SSDI-only and former concurrent beneficiaries, though we interpret those results as suggestive due to concerns about selection.