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The Benefit Receipt Patterns and Labor Market Experiences of Older Workers Who Were Denied SSDI on the Basis of Work Capacity
- In the years prior to application, most but not all applicants who are ultimately denied benefits are working. The likelihood of employment in the years following denial is much lower than in the years prior to denial, regardless of the reason for denial. Five years after the initial decision, 10 to 20 percent of denied applicants are working, a substantially lower share than the employment rate of all older adults in the same age group. Though our estimates are imprecise, our results suggest that applicants denied at step 5 may be more successful in working after denial, and in replacing a higher share of pre-application earnings relative to other denied applicants.
- At least two-thirds of applicants initially denied SSDI for work capacity reasons are ultimately awarded SSDI benefits after appeal or reapplication, more than double the share that receive SSDI after an initial denial for medical reasons. Data limitations make it difficult to identify the precise share of denied applicants who claim OASI prior to FRA, but our estimates imply that most initially denied applicants either receive SSDI or OASI prior to FRA.
- Relative to applicants initially denied at step 5, the characteristics and occupational profiles of applicants initially denied at step 4 indicate they are relatively lower-skilled workers in modest jobs; those denied at step 4 were more likely to be unmarried, female, and Hispanic, and less likely to have postsecondary education. Compared to applicants denied at step 5, applicants denied at step 4 earned a lower hourly wage before application and had lower average annual earnings between age 22 and 50. Those denied at step 4 were also more likely to work in occupations requiring high interpersonal skills and computer use, but less likely to work in jobs demanding continual skills updating, complex problem solving skills, and technical skills.
This paper considers the experiences of SSDI applicants initially denied benefits because the examiner determines that they can perform past work or other work. To conduct our analysis, we use the Health and Retirement Study (HRS) linked both to SSA records on benefit application and receipt and to earnings records based on Internal Revenue Service (IRS) data. We find that few older SSDI applicants denied benefits for this reason work at a substantial level following denial. More commonly, those denied benefits at this stage continue to pursue benefit receipt, often successfully. Nearly two-thirds are ultimately allowed SSDI after appealing the initial decision or reapplying, and our estimates suggest that many of the rest claim Old Age and Survivors Insurance (OASI) prior to full retirement age (FRA).