The Impact of Disability Benefits on Employment and Crime

A Federal welfare reform that took effect on August 22, 1996, required low-income children with disabilities to be medically evaluated as part of the Social Security Administration process to determine if they would continue to receive assistance in cash as adults under the Supplemental Security Income (SSI) program.

Almost all child SSI recipients who turned 18 after the reform were assessed to determine whether their disability interfered with their ability to work enough to qualify them for cash benefits as adults. Most children turning 18 before that date moved on to adult SSI without an eligibility test. After the reform, about 36 percent of those who had a medical exam were removed from SSI, losing nearly $10,000 in annual benefits compared to those who remained in the program.

The removal of low-income youth with disabilities from Supplemental Security Income at age 18 has increased criminal charges associated with income generation as well as incarceration rates.

In Does social assistance prevent crime? Criminal Justice Outcomes of Youth Removed from SSI (NBER Working Paper 29800), Manasi Deshpande and Michael G. Mueller-Smith use SSI records, income records, criminal court charges, and correctional data between 1997 and 2017 to examine how the loss of cash benefits affected youth employment and criminal justice outcomes 18 over the next two decades.

Researchers found that removing youth from SSI significantly increased criminal charges, with a 60% increase (from 0.63 to 1.0) in charges associated with income generation, such as theft and robbery. heist. There was also a 60% increase – from 4.7 to 7.6 percentage points – in the annual likelihood of being incarcerated. Although the removal of SSI also increased the likelihood of young people being in formal employment – ​​the fraction of young people earning at least $15,000 per year increased from 11% to 16% – the increase in criminal justice involvement was even more important. The share of people over the age of 18 who were subsequently charged with a revenue-generating crime rose from 24% to 33% after the SSI was removed. Researchers find that young people respond either by working more in the formal sector or by engaging more in criminal activities; very few respond on both margins.

The effects of removing SSIs varied across subgroups. For men, the increase in criminal charges was concentrated on theft and burglary, and the annual likelihood of being incarcerated increased by 50%, from 7.2 to 10.8 percentage points. For women, the largest increases in criminal charges were for theft, prostitution, and forgery/fraud (e.g., identity theft), with a subsequent increase of 230% in the annual incarceration rate, from 0 .7 to 2.3 percentage points. The impact of removing SSI on incarceration was disproportionately high for youth with low-income parents and young black adults, two groups with high base incarceration rates.

Researchers assess the impact of the SSI review on various government expenditures and find that the increased cost of law enforcement and incarceration nearly eliminates SSI savings. They estimate that removing a youth from the SSI program saved taxpayers an average of $49,000 through lower SSI and Medicaid expenses and increased tax revenue due to higher incomes of adults. However, they also find that the average increase in police, court, and incarceration costs associated with each SSI removal was $41,000. They estimate the costs to victims, using conservative assumptions, at $87,000 per referral.

—Aaron Metheny

About Antoine L. Cassell

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