April 8, 2013 10:00am by David Farrar

US Disability Benefits

In case you needed convincing about the need for welfare reform, this story from the United States should help convince you.

It was an exclusive story for Planet Money on National Public Radio. It has had great resonance in the US, as it has exposed how great the growth in numbers on disability welfare has been.

Some key findings:

14 million people a month now get a disability check from the Government.
In one county in Alabama, 25% of working adults are on a disability benefit.
That the proportion of those claiming a disability benefit with a difficult to test problem (back pain, mental illness) has increased from 18% in 1961 to 53% in 2011.
That some states have as many as 9% of their adults on a disability benefit.
Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since then.
The disability benefit pays $13,000, just $2,000 less than the minimum wage, plus Medicare so some are better off financially not working.
The number of children on a disability benefit has increased seven fold since 1974 to over 1.2 million.
If these children with learning or other disabilities get a job, their parents lose the $700 a month disability check.
Disability welfare now costs $260 billion a year, and will run out of reserve duns by 2016.

People should remember this story, when Labour and Greens constantly say there is no need for welfare reform in New Zealand. Note that the numbers receiving the Invalids Benefit in NZ has increased eight fold since 1976 from 10,000 to 84,000. Now by no means should anyone conclude this means everyone on that benefit shouldn’t be there. To the contrary I know some people on that benefit who would love to be able to work, or work longer hours than they can. So we need to be careful not to stigmatize those who are in genuine need.

However as the US story shows, the growth in the level of such benefits has been massive, and I encourage people to read the full story about what happens when the incentives to be on welfare are greater than to be in work.