The Labor Market Consequences of Receiving Disability Benefits During Childhood
Working Paper 51
- The Zebley decision made it easier for children with mental disabilities to qualify for SSI benefits.
- Children with mental disabilities who were younger when the decision occurred received benefits for a longer period of time in childhood.
- These children have lower earnings as adults, with cumulative earnings between ages 18 and 30 as much as $30,000 lower for children who were 10 when the decision occurred.
- Some of this impact may be driven by higher SSI receipt as adults, however total income, measured by adding SSI benefit receipt to total labor market earnings, is still substantially lower for children who received SSI for the longest in childhood.
This paper estimates the labor market effects of gaining eligibility for Supplemental Security Income (SSI) disability benefits during childhood. In theory, access to SSI could help children treat their disabilities, thus improving labor market outcomes in the long run. Alternatively, children who are designated as disabled may reduce their investment in human capital, which would harm future labor market outcomes. I identify the effects of qualifying for SSI benefits through a natural experiment—a Supreme Court decision eased the criteria to be considered disabled, especially for children with mental disorders. The policy change also occurred earlier in some people’s lives than others. For individuals with a mental disorder, each additional year of exposure to eased standards during childhood increased their SSI receipt by 0.3 years and reduced cumulative labor market earnings through age 30 by $1,600. Importantly, this does not address the full range of outcomes that may be affected by receiving benefits.