Art Cashin Explains What Happens To Those Who Stop Looking For Work

Tyler Durden's picture




 

While the government propaganda machine chugs along and tells us to move along, there is nothing to see in the plunging labor participation rate, it is just 50 year olds pulling a Greek and retiring (fully intent on milking those 0.001% interest checking accounts, CDs and 3 Year Treasury Bonds for all they are worth - they are after all called fixed "income" not "outcome") there is more than meets the eye here. Yet while we will happily debunk any and all stupidity that Americans actually have the wherewithal to retire in droves as we are meant to believe (with the oldest labor segment's participation rate surging to multi-decade highs), there is a distinct subset of the population that migrates from being a 99-week'er to moving to merely yet another government trough - disability. Art Cashin explains.

From UBS Financial Services

I’m Sick Of Being Unemployed - A couple of strange and rather disquieting reports circulated among the Friends of Fermentation yesterday. The topic was unemployment or, more specifically, where do those people go who have stopped looking for work. Their absence is credited with distorting the unemployment rate and making it lower than most expect or believe.

The reports I allude to, contended that many went on disability. In fact, they projected that nearly 25% of those not actively seeking a job had applied for, and been accepted, by disability - mostly Social Security.

One of the reports came from a site called SoberLook.com (a perfectly logical place for the Friends of Fermentation to be browsing). The Sober report quoted extensively from a report by JPMorgan. I was unable to locate the original JPM report but we’ll assume that Sober quoted from it correctly. Anyway, here’s a bit from SoberLook:

But how does one survive after losing the unemployment benefits? Clearly people struggle. One way to pay the bills however is to file for and receive the federal disability benefits - assuming of course one has a disability. Interestingly enough, the Great Recession and the slow recovery somehow generated many more disability recipients.

 

JPMorgan: As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labor force— currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began.

The Sober report then goes on to look at the makeup and maladies of those going on disability:

JPMorgan points out that increases in the number of disability benefits recipients account for about a quarter of the decline in employment participation. Furthermore during recessions the number of new disability claims actually increases, even though the number of jobs with higher injury incidence (such as construction) generally declines. Try explaining that one... Half of the benefit recipients suffer from "mental disorders" and "musculoskeletal disorders" (such as back pain). "Mood disorders" alone account for over 10% of this group. And once someone starts receiving these benefits, it's almost impossible to take the off the program. In 2011 only 1% of the recipients lost their benefits because they were no longer deemed disabled. So how much is this program costing the US taxpayer? Apparently quite a bit.

 

JPMorgan: The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.

 

Thus a quarter of people who drop out of the workforce and come off the unemployment benefits, simply move to receiving disability payments. And most stay there until they roll into the social security program when they retire - from their disability. The same source, a different program.

The other article on the disability phenomenon was authored by Robert Samuelson and carried by Real Clear Politics. It quoted extensively from a paper by David Autor of MIT. They cite a similar relationship of rising unemployment to rising disability application.

Autor attributes disability's expansion mainly to liberalized, more subjective eligibility rules and to a deteriorating job market for less-educated workers. Through the 1970s, strokes, heart attacks and cancer were major causes. Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981's 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up.

 

For many recipients, the disability program is a form of long-term unemployment insurance, argue Autor and his frequent collaborator Mark Duggan of the University of Pennsylvania. Benefit applications surge when joblessness rises. From 2001 to 2010, annual applications jumped 123 percent to 2.9 million. On average, recipients start receiving payments at age 49 and keep them until 66, when they switch to Social Security's retiree benefits.

 

Superficially, the case for overhaul seems overwhelming. Tougher eligibility standards would protect the genuinely disabled but limit benefits for others. Don't hold your breath. For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. "People are driven into the program by desperation," says Autor. Nor are they rolling in money; the average payment is about $14,000 a year.

Another, rather familiar relationship showed up a bit later in the article:

Lawyers would also resist big changes. The Social Security Administration initially rejects about two-thirds of applications, but about half of these are appealed by lawyers and other professional advocates before administrative law judges, where the approval rate is between 60 percent and 75 percent. In a series of well-reported stories, The Wall Street Journal's Damian Paletta showed that the system is open to abuse. But it's also lucrative. Lawyers and other advocates are entitled to 25 percent of back benefits up to $6,000 per case. Their total payments approach $1.5 billion annually.

 

The larger budget quagmire now comes into focus. What the federal government does is so vast that it suffocates informed debate and political control. The built-in bias for the status quo reflects the reality that the various parts of government are understood, defended and changed mainly by those who benefit from their existence. However strong the case for revision (and it is powerful here), it is tempered by political inertia. What's sacrificed is the broader public good. The quagmire is of our own making.

So, when your unemployment benefits are running out and no potential jobs are visible, it’s almost natural to look in the mirror and wonder why you aren’t feeling good…..er…..make that well (sorry, Sister).

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Tue, 02/14/2012 - 16:09 | 2158732 fonzannoon
fonzannoon's picture

Ben must be sweating his bald head off today fighting this selloff. No lunch today. Get in there and buy! Market.....must....go...positive.....!

Tue, 02/14/2012 - 16:16 | 2158761 prains
prains's picture

My tummy hurts

Tue, 02/14/2012 - 16:24 | 2158817 optimator
optimator's picture

My post was not a joke!  State worker, whose Mom is a State Representative, out on disability because of a stomach ache trying to get back  $2500 bucks she put down for a personal trainer. 

http://www.courant.com/business/custom/consumer/hc-bottom-line-healthtrax-20111231,0,6810045.column

Tue, 02/14/2012 - 16:43 | 2158918 trav7777
trav7777's picture

i wonder what the racial breakdown is on SSI...oh wait, no i don't.

Tue, 02/14/2012 - 16:47 | 2158948 ratso
ratso's picture

All the SSI recipients I know are white middle class men and women who are playing golf and tennis in between trips to the bank.  They include cops, firemen attorneys and business owners.

Tue, 02/14/2012 - 18:08 | 2159398 CompassionateFascist
CompassionateFascist's picture

Agree. Race aside, I've yet to meet anyone on "disability" who was substantially disabled in any way. Just another debt-financed, vote-buying socialist racket. "Only" 14Gs a year? Add on the medicaid, food cards, Sec 8 and 900 other ways of working the system...just now adding free contraceptives...and this crowd lives quite comfortably.

Tue, 02/14/2012 - 21:04 | 2160037 CrashisOptimistic
CrashisOptimistic's picture

Guess what, sports fans.  The LPR of previous norms was the basis of all baseline budget projections. 

Well, not only is the 2% cut in labor participation rate going to translate into no taxes paid by these ppl, they are also going to draw 14K/yr.  Double slam.

ALL FISCAL BUDGET PROJECTIONS JUST BECAME MUCH WORSE.

Wed, 02/15/2012 - 20:37 | 2164190 fnordfnordfnord
fnordfnordfnord's picture

Wait, you're opposed to "free contraceptives" for the welfare niggers? Are you just a babbling automaton, or does the shit you're spewing appear logical through your eyes?

Tue, 02/14/2012 - 18:41 | 2159553 HungrySeagull
HungrySeagull's picture

DO NOT confuse SSI with SSdI (Disability)

SSI is a even harder program with less money given to those who are disabled through no fault of their own. Blindness, Deafness and Birth Defects etc. I consider that a compassionate act on our Government to take care of these people who probably will not enjoy the fullest freedom we enjoy.

And that includes mental retardation (Sorry I aint politically correct and don't care) and those injured and need a guardian appointed to manage and make decisions for them.

And Trav, dont even bring up race. It strikes across the board.

Tue, 02/14/2012 - 19:18 | 2159703 JR
JR's picture

If race is a factor by minority advocacy groups or political parties who give assistance to special groups on how funds are allocated, then race is relevant; discrimination cuts both ways. Race is an extremely timely topic, especially when race is a deciding factor for the transfer of private property (income) from one group of citizens to another. How dare the government say we can’t talk about it!.

And, according to the Social Security Law Attorney website,”the designation of the SSI program as ‘High Risk’ by the General Accounting Office (GAO) is well deserved” when it comes to fraud. 

For instance, “In 1994, GAO reported that after years of rapid growth, an estimated 250,000 Americans were getting disability checks due to drug addiction or alcoholism.

“The government is literally paying people to drink themselves to death.  Hence, in 1996, SSA ended the drug addicts and alcoholics part of the program and used some of the savings for more drug treatment where it might help individuals overcome their addictions.”

Also, “the SSA has identified a general increase in the amount of annual overpayments made to (1) individuals who are found to have violated program residency requirements or to (2) recipients who leave the United States and live outside the country for more than 30 consecutive days without informing the SSA.”

Yet:  “Despite these tremendous strides, however, GAO will testify that SSI remains on its list of programs at high risk of waste, fraud and abuse.”

http://www.socialsecuritylawattorney.com/Fraud.html

Tue, 02/14/2012 - 22:23 | 2160254 UP Forester
UP Forester's picture

So, they haven't figured out the 26 year olds on SSI, that come in to the ER with Medicare and Medicaid for a sore throat, and roofing tar all over their hands?

Or do they not have a problem with that, because I certainly do.

Tue, 02/14/2012 - 22:45 | 2160320 JR
JR's picture

A government in business to ruthlessly exploit its most productive and responsible into poverty, seldom sees a financial fraud it doesn’t like.

Wed, 02/15/2012 - 04:48 | 2160895 drunkenlout
drunkenlout's picture

SSI is Supplemental

Security Income, largely for people who were disabled from birth.  Had they become working adults, they would get SSDI.  

There is huge fraud within the SSI popualation, but that comes from healthcare providers who deliver entitlement services to the SSI population, not from the recipients.  Here's an example of thow that happens: a doctor is the resident physician of an Intermediate Care Facility for Develpmentally Disabled, a form of long-term care.  The Doc goes there one day each month, walks through the facility, and has a nurse record his comments on each resident.   Medicaid is billed the applicable rate.  The doc leaves in a short period of time.   If any resident is really ill, staff call the doc and initiate a new set of charges.

One reason we can't scale back costs to a reasonable level is that we're confused about which program is involved, and about how we are swindled in each.

 

Tue, 02/14/2012 - 20:21 | 2159902 midtowng
midtowng's picture

I should point out that the largest percentage of those missing from the labor force are those who never had a chance to enter it: high school and college graduates who can't find any job.

Wed, 02/15/2012 - 05:05 | 2160916 StychoKiller
StychoKiller's picture

Which is a damning indictment of the public Education System...

Tue, 02/14/2012 - 16:55 | 2158959 Manthong
Manthong's picture

"Ben must be sweating his bald head off today fighting this selloff. No lunch today. Get in there and buy! Market.....must....go...positive.....!"

                                        Reptiles don't sweat.

                                        ..another PPT end of day no vol pump in progress.

Tue, 02/14/2012 - 17:06 | 2159089 Dr. Richard Head
Dr. Richard Head's picture

And paper bug Joe Weisenthal Tweets about wondering how many times a bear dick has been cut off in these late day rallies.  I don't like that man.  Thank aqua buddah I don't play in the pape rmarket.

Tue, 02/14/2012 - 17:21 | 2159188 francis_sawyer
francis_sawyer's picture

OOOOOH... It's my arm... It's BROKEN!

http://www.youtube.com/watch?v=P_wy8ebqKbA

Tue, 02/14/2012 - 18:16 | 2159432 Cpl Hicks
Cpl Hicks's picture

Let's see...Rodney D in Caddyshack...and I didn't even peek at the video.

Was I right?

Tue, 02/14/2012 - 17:18 | 2159165 kito
kito's picture

TRAV you dont get out to middle america too much i see.....

Tue, 02/14/2012 - 17:46 | 2159318 NotApplicable
NotApplicable's picture

Why, he can't even keep his racism coherent!

Apparently, unemployed people have jobs to become disabled from.

Wed, 02/15/2012 - 00:52 | 2160667 Joseph Jones
Joseph Jones's picture

We know lots of poeple in N. Utah collecting disability.  If you think most people in N. Utah are not white, think again. 

Tue, 02/14/2012 - 16:27 | 2158829 VanillAnalyst
VanillAnalyst's picture

This study is glass half empty. Don't think of the 1 in 4 unemployed people who go on disability, think of the 3 out of 4 unemployed people who don't suffer from depression!

 

.....or perhaps they just don't realize how disabled someone would have to be, to be unemployed

Tue, 02/14/2012 - 16:31 | 2158858 TheGoodDoctor
TheGoodDoctor's picture

It's the unintended consequences of the Health Care Industrial Complex and the Banking Industrial Complex.

Tue, 02/14/2012 - 16:41 | 2158913 GernB
GernB's picture

Are you saying all these complexes could give you a complex.

Wed, 02/15/2012 - 05:09 | 2160920 merizobeach
merizobeach's picture

L. Ron Hubbard said 'yes'.  Prolific novelist, that guy.

Tue, 02/14/2012 - 17:50 | 2159331 donsluck
donsluck's picture

Maybe intended?

Tue, 02/14/2012 - 16:46 | 2158933 orangedrinkandchips
orangedrinkandchips's picture

depression=REALITY

Tue, 02/14/2012 - 17:08 | 2159099 Dr. Richard Head
Dr. Richard Head's picture

Listen, I don't care if the glass is half-full or half-empty as long as it is whiskey in the glass we are speaking of.

Tue, 02/14/2012 - 17:49 | 2159327 NotApplicable
NotApplicable's picture

I keep telling people that depression is NOT a disease, but a coping strategy. As fucked up as everything is, you should be depressed, otherwise, you're likely delusional, and thus, are adding to the overall fucked-upness of society.

Tue, 02/14/2012 - 19:22 | 2159714 ProtectiveFather
ProtectiveFather's picture

I can see the argument that depression is a normal reaction to bad circumstances, but how does depression help you cope?

Tue, 02/14/2012 - 21:10 | 2160053 Errol
Errol's picture

Evolutionary Biologists have theorized that depression evolved to prevent people from wasting energy via multiple repetition of activities that failed to be productive (for most of human history, people had a problem with getting enough calories, rather than eating too many).

As an ironic aside, right now my ZH screen includes an ad for expert assistance in getting your disability claim approved...

Tue, 02/14/2012 - 21:56 | 2160182 smiler03
smiler03's picture

I keep telling people that depression is NOT a disease, but a coping strategy.

There is depression and "clinical depression". The two of them are not the same and if you think they are then hundreds of thousands of experts would disagree with you. But hey, what do you expect in a country where the population is paranoid about fluoride, vaccinations, gay marriage, free contraceptives and evolution, not necessarily in that order.

http://uhs.berkeley.edu/lookforthesigns/depressionsuicide.shtml

Wed, 02/15/2012 - 01:17 | 2160697 Gold Dog
Gold Dog's picture

Ear ache, my eye!

Wed, 02/15/2012 - 05:08 | 2160919 StychoKiller
StychoKiller's picture

Eye ache, my ear!

Wed, 02/15/2012 - 16:41 | 2163328 Sokhmate
Sokhmate's picture

I'm sleepy, I should eat.

Tue, 02/14/2012 - 16:40 | 2158905 GernB
GernB's picture

Yes ES is down a whopping 0.67% percent. If we can just keep this rally going like it has since the start of the year the S&P should make 1900 before the end of the year. Then equities will be fairly valued.

Tue, 02/14/2012 - 17:13 | 2159135 illyia
illyia's picture

Right on schedule. Chart is ... fill in with your own expletive (amazingly obvious, hilarious, sick, etc.)

Tue, 02/14/2012 - 17:35 | 2159277 AllAboutTheBenjamins
AllAboutTheBenjamins's picture

the sweat makes his bald head so nice and shiny though

Tue, 02/14/2012 - 18:26 | 2159485 emunah73
emunah73's picture

USA is a really funny country. Or better word maybe - surreal. You can get disability because of personalitiy disorder and depression?? Unless it's restricted to trully disabilitating clinical depression that demands hospitalization and heavy medication or severe personality disorder it's totally strange to me.

Half of the Wall Street could go on disability then as antisocial and narcissistic personality disorder is so common there, so yes, it looks like they have still something up their sleeves :D

But seriously - the article doesn't make it clear - looks like the eligibility is very stretched.

What about remaining 75%? I guess they just work off the books :D

Tue, 02/14/2012 - 18:42 | 2159566 HungrySeagull
HungrySeagull's picture

You better not claim mental disorder. If you do, you just written off your own right to bear arms and other freedoms.

Tue, 02/14/2012 - 18:46 | 2159577 jekyll island
jekyll island's picture

I see these people in the ER all the time, it drives me crazy.  I keep threatening to write a book and title it: "It Only Hurts When I Work".  People on disability for anxiety, depression, back pain, because they look funny, etc.  The Gubmit just raised the allotment to $1800/month, up from $1200, I believe.  Plus food stamps, medicaid, welfare, it starts to add up.  Why go to work when you can make as much as a FT minimum wage job and get benefits?  Welfare state needs to stop, they are crowding up my emergency department.  God forbid you have a real emergency when all the entitlement people are making their weekly visit.  This does not include all the people who are coming to the ED several times to get a "track record" established to support their disability claim.  Just to let you know in advance, No, I will not fill out the disability certification for you.   

I had a lady come in who was depressed and suicidal, brought her 13 year old daughter with her.  The woman kept carrying on right in front of the girl (if you were wondering where and how they learn this behavior) and so I asked her if living for her daughter was something to hold on to.  Her reply?  "No, she can have my SSI disability"  The entitlement attitude is so entrenched that the disabled poor are considering their benefits as family property that can be given to the heirs.  The system has to collapse and flush out all these people, disability is robbing them of their dignity and they are teaching their children that it doesn't matter.  

Tue, 02/14/2012 - 19:32 | 2159705 Marco
Marco's picture

What of the truly disabled with families unable/willing to care for them? Social Darwinism? Or are you going to use the RP faint that charity can do it just like in the old days ... the old days when the vast majority of people were church going and health care costs were negligible. For better or for worse, those days are gone and we need different solutions.

The welfare state doesn't need to stop, it just needs to be less cushy and stop handing out money. Money is freedom, the best impetus to get people back to work is to remove most of their freedom (also making sure there actually are jobs available of course, which in the case of the disabled probably needs per employee subsidies).

Just give people who initially go on welfare food stamps, the ability to purchase necessities on request, direct payments for rent/mortgage and health care. Live too long on welfare and you force them to move to the cheapest housing available. Break the rules and you lose the right to privacy and to use electricity for non essentials. Etc.

Welfare runs the gamut from handing out money to all takers and poorhouses ... just because the system went too far in one direction is a poor excuse to just throw it on the bonfire entirely and go for social Darwinism (which is the reality of what would happen today without social safety nets).

Tue, 02/14/2012 - 19:51 | 2159784 jekyll island
jekyll island's picture

Sorry, no, it has to be dismantled.  It has been corrupted by the politicians and is unsalvageable.  My friend worked in an occupational health position with the state of Kentucky.  He was asked to resign by the administrative director after six months, seems that their budget is tied to the number of people they enroll and service on the disability rolls.  My friend turned down most of the applications and the district budget was cut, they had to lay off people.  Admin traced it back to him and told him to start approving applications or find another job.  He left.  It is a perpetual motion machine that feeds on itself, creates more government jobs and keeps local politicians in office, funded by the disability lawyers who charge $4k per person to "shepherd" a disability claim through the system.

I truly feel for the people who are disabled and are in need of SSI. Welfare and food stamps should have a defined benefit, perhaps 5 years max.  Only short term fix that makes sense to me is that everyone should have to reapply for disability every 3 years, show proof of continued disability and go through the entire process again.  A third party independent evaluation that is required with private disability insurance claims would be adequate, but no way the local government entities would cede control of that to a vendor with their budget on the line.  

Tue, 02/14/2012 - 20:13 | 2159870 Marco
Marco's picture

What toss ... government has been corrupted entirely and at this point most property has been gained through gaming it ... so should we just go for complete anarchy?

"Welfare and food stamps should have a defined benefit, perhaps 5 years max."

What if there is simply no living wage employment to be had?

You haven't thought your third party evaluation through BTW. There is no way to create a financial incentive for such a third party to judge eligibility any better than a government agency (and they will always judge according to their financial incentive, that's what you rely on when privatizing ... or at least what you should rely on). They will want to grow their budget just as much and judges will still be the final gatekeeper, nothing much would change except that the wage distribution would become more top heavy at the third party compared to the government agency.

The only solution is good governance ... there is never an alternative, only fairy tale lies which lead to Somalia.

Tue, 02/14/2012 - 21:24 | 2160002 jekyll island
jekyll island's picture

I have been to several countries were there is no welfare and the world does not stop spinning on it's axis if the government is not there to pay people not to work.  People who cannot work have to rely on family, friends and NonGSO around them for help.  It used to be that way in the US as well.  The creation of a welfare state is one of the harbingers of the decline of a nation and their quality of life.  It is similar to leaving the gold standard, every country that has tried it has failed.  I don't know what to tell you, I am all in favor of people in need receiving aid.  The government has done a poor job of mananging SSI from the very beginning because it quickly became an entitlement used to buy votes and favors, not a safety net to protect those who were injured while working.  Hell, I'm a doctor and get paid nothing for about half of the patients I see.  If that was the defining factor in my career then I would have moved on to something else long ago, bankers and dentists have much better hours.  People need to work, need the stability and dignity working provides.  Trapping people into disability and inactivity just above the poverty level is a fool's existence and locks them into being dependent on the government.  What will they do when the checks stop coming?  

Wed, 02/15/2012 - 11:36 | 2161771 Marco
Marco's picture

The US has had welfare since before the civil war ... the US started to decline ~50 years after it started according to you. Welfare isn't the problem ... governance is.

Peak oil and the rise of wealth inequality set in the decline of the US, not welfare.

As for what will happen if you let people starve in communities unwilling and/or unable to support them (the US is no longer a christian agrarian nation, this is the time of cities egoism and prosperity theology). Mad Max.

Wed, 02/15/2012 - 05:15 | 2160927 StychoKiller
StychoKiller's picture

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." - James Madison

"Charity is no part of the legislative duty of the government." - James Madison

Tue, 02/14/2012 - 20:50 | 2159998 Hacked Economy
Hacked Economy's picture

@jekyll island,

I hear ya loud and clear.  A neighbor of ours (here in LA County) moved in down the street and was surprisingly vocal about how she was receiving *extra* money from the gov't on top of her standard welfare checks because she had her kids diagnosed with ADHD and "clinically required medication" for it.  Then she put them into our local school district and their staff refused to place them in special-ed classes because they said the kids were normal.  Well, the school's declaration of "normal" removed the kids' eligibility for the state-funded drug payments (the kids hated taking the drugs, anyway), which pissed the mom off because her income was reduced.

So what did she do?  She took them in to a Medi-Cal sponsored psychiatric counselor and told stories (lies, as we later discovered) about how the kids were traumatized with the world around them.  The counselor not only re-instated the ADHD declaration, but added "Oppositional Defiant Disorder", which is an eyebrow-raising way of saying they sometimes didn't like being told to eat their veggies and go to bed on time.  With TWO disorders now officially declared and filed, the woman now gets even MORE money from the gov't.

Yikes.

Tue, 02/14/2012 - 21:10 | 2160058 jekyll island
jekyll island's picture

Hacked, 

Preaching to the choir, unfortunately.  There is too much fraud in the system that is sanctioned by the government to ever hope for meaningful reform.  Marco's point is valid, what about the people who truly need disability?  They are the ones who are going to be hurt the most.  

 

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