Returns to Work for
Young Adults on SSI
FLC Conference
November 18-19, 2010
Richard V. Burkhauser, Cornell University
Mary C. Daly, Federal Reserve Bank of San Francisco
Philip Armour, Cornell University
Joyce Kwok, UC Berkeley
The views expressed in this presentation are those of the authors and are not intended to
represent those of the Federal Reserve System, the FLC, or the Social Security Administration.
Funding for this project was provided by the Social Security Administration.
Plan of talk
 Motivation and background
 Our research questions
 Year 1 findings and review of results
 Year 2 plans and preview of results
Motivation: young SSI recipients
 The SSI child population has risen
dramatically over the past two decades.
decades
SSI child beneficiaries transition
 Most SSI-child
directly onto the SSI-adult program.
 Very few of these young adult SSI recipients
ever seek or gain employment.
Outcomes not seen as optimal
Costly to beneficiaries and taxpayers
 Young SSI beneficiaries live at or near the
poverty
p
y threshold and lose ground
g
relative to
others over time
 T
Taxpayers face
f
increasing
i
i costs
t off
supporting a growing population of young
people from childhood through old age
Prompted YTD Project
Improving employment
outcomes for youth with
disabilities
YTDP identified potential barriers to work
 Low
L
expectations
t ti
for
f working
ki
and
d self
lf sufficiency
ffi i
 Lack of access to employment services and workbased experiences
 Uncoordinated handoff to adult services
 Inadequate
I d
t access to
t social
i l and
d health
h lth services
i
 Financial disincentives to work
 Lack of knowledge about how benefits change
when a person works
MDRC report on the YTD project, 2008
Our research questions
 What are the financial incentives and
disincentives to work for young adult SSI
recipients?
 Are the incentives/disincentives well
documented and well understood?
 Can we increase knowledge and improve
understanding through financial literacy tools
tailored to young adult SSI recipients?
Main Findings from Year 1
Returns to work for young SSI recipients
greater than generally understood

Earnings retention rules allow young SSI
recipients
i i t to
t boost
b
t monthly
thl income
i
through
th
h work
k

With a modest amount of work, young SSI
recipients can qualify for a lifetime SSDI benefit

y to “easily”
y q
qualify
y for SSDI is shortThe ability
lived—the window closes by age 23 (first work)
Boost monthly income with work
Monthly income from working while on SSI
Values based on federal minimum wage: $7.25
Monthly Income
1400
1200
Total Income: SSI + Work
1000
800
600
SSI-No Work
400
200
0
0
5
8
13
16
21
24
Hours worked per week
Source: Authors' calculations using SSI rules, SSA Redbook.
29
32
35
40
Qualify for a preferred benefit
SSI Rules and Benefits
SSDI Rules and Benefits

Earned income “taxed” 50%
after a $65 exclusion

No “tax” on earnings under
SSA limit--$1,000 in 2010.

Unearned income reduces
b
benefits
fit dollar-for-dollar
d ll f d ll after
ft
a $20 exclusion

No unearned income limits

No asset limits

Benefit are indexed to wages
prior
to claiming
p
g

Once claimed, DI benefit rises
with CPI, just like SSI

Assets limited to $2,000

Benefits fixed in real terms—
do not rise with economy

Over time,, the incomes of SSI
beneficiaries fall further and
further behind population
Getting SSDI is not implausible
Thresholds for 18-24
Basic Requirements

Earn sufficient quarters of
coverage to become fully
insured and DI insured

Very low quarters of coverage
requirements: 6 quarters of
earnings > $1,120 *

Meett computation
M
t ti
year
requirements for DI benefits

Very low computation year
requirements: 2 years

Generate an AIME that beats
SSI b
fit
benefits

AIME that beats SSI—
breakeven level—has been
falling over time
*About 4 weeks of work per quarter at the FMW of $7.25
Modest work can qualify
SSDI and SSI benefits by earnings level
Single, disabled person living independently, 0 earnings, meets asset test
2010
Breakeven
AIME = $749
Dollars
2500
FMW; 26 hours per week
2000
SSDI
1500
1000
SSI FBR = $674
0
1000
2000
3000
4000
Average Indexed Monthly Earnings
5000
500
0
6000
Far easier than in 1980
SSDI and SSI benefits by earnings level
Single, disabled person living independently, 0 earnings, meets asset test
Breakeven
AIME = $749
Dollars
2500
2000
SSDI
1980 Breakeven
AIME = $1,031
1500
$FMW; 48 hours per week
1000
SSI FBR = $674
0
1000
2000
3000
4000
Average Indexed Monthly Earnings
5000
500
0
6000
But the window shuts quickly
Years of Work Required, by Age at First Year of Work Years
40
35
30
By age 22, the requirements for
entry are increasing.
25
20
15
Computations Years
10
DI Eligbility
5
0
16
17
18
Source: Authors' calculations.
19
20
21
22
23
Age at First Year of Work
24
25
26
27
Plans for Year 2
Increase understanding of these results
 Written materials describing benefits
 Online financial calculator
 Accompanying training materials for advocates
 Prototypes
yp of these materials are available at
the Booth: Understanding the Returns to Work
for Young Adults on SSI