Newest Government Magic Trick: Disability Fraud Holds Down U.S. Unemployment Rate

Looking for another reason for an artificially low unemployment rate? Consider disability fraud, people claiming disabilities they do not have such as mental illness. Prior to the great recession 33% of applicants claimed mental illness. The number is 43% now.

There was fraud before, of course. There is even more fraud now. Please consider: Jobless disability claims soar to record $200B as of January
Standing too many months on the unemployment line is driving Americans crazy — literally — and it’s costing taxpayers hundreds of billions of dollars.

With their unemployment-insurance checks running out, some of the country’s long-term jobless are scrambling to fill the gap by filing claims for mental illness and other disabilities with Social Security — a surge that hobbles taxpayers and making the employment rate look healthier than it should as these people drop out of the job statistics.

As of January, the federal government was mailing out disability checks to more than 10.5 million individuals, including 2 million to spouses and children of disabled workers, at a cost of record $200 billion a year, recent research from JPMorgan Chase shows.

The sputtering economy has fueled those ranks. Around 5.3 percent of the population between the ages of 25 and 64 is currently collecting federal disability payments, a jump from 4.5 percent since the economy slid into a recession.

Mental-illness claims, in particular, are surging. During the recent economic boom, only 33 percent of applicants were claiming mental illness, but that figure has jumped to 43 percent, says Rutledge, citing preliminary results from his latest research.

His research also shows a growing number of men, particularly older, former white-collar workers, instead of the typical blue-collar ones, are applying.

The big concern about the swelling ranks is that once people get on disability, they’re unlikely to give it up and go back to work.

What's the Number?

The above article says there were 10.5 million individuals receiving disability checks. A quick check of Fed data shows there are 27.5 million Civilian Noninstitutional Population - With a Disability, 16 years and over. Unfortunately the data only goes back to mid-2008. I would like to see the pattern before the recession began.

We can see a brief recovery for a year following the end of the recession. However, since mid-2010 the number of people with disabilities has risen by 1.5 million.

All of them dropped out of the labor force and are no longer counted as unemployed.


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