The Impact of Unemployment on Social Security

The U.S. Labor force consisted of 160 million employees prior to The Greater Recession (that's what it is being called now). According to a recent article in the Wall Street Journal," Nearly 12 million people [still] remain unemployed". This number measures those "officially" unemployed. There has been a major reduction in our labor force since then for a number of reasons: (1), after looking for employment for over a year, many applicants have stopped looking and are dropped from the official numbers (2), others are no longer counted as being in the labor force when their unemployment compensation expires (3), many are returning to school for retraining and (4), approximately 5000 Baby Boomers a week are retiring and collecting Social Security. According to a recent article in the Wall Street Journal, an unrealized, very discouraging development is another cause in the decline in our labor force.

Each month approximately 250,000 Americans pile into the Social Security Administration's disability program. This equals approximately 3 million workers per year! Other journalists write:" [this] threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues." Even worse, these additional millions of recipients are draining the Social Security Fund that was initially established as a supplemental pension fund. Lawyers have created a lucrative business by representing claimants that have been denied disability when they first appeared in court. Once the lawyers win the case for the claimants on the second, or third - or subsequent - appearances before the court, the Social Security Administration is required to pay monies due from when the initial claim was denied. This amount can be equal to many months, or years, of back compensation. Guess who receives this first check? You're right. The attorneys deduct their fees of thousands of dollars and the claimants receive the remaining thousands of dollars. Thereafter the recipients receive monthly checks.

Many of the claimants have incurred injuries that prevent them from performing their current jobs but this condition, although unfortunate, does not qualify as a reason to collect disability. The claimants can do other work but the income they would earn from their "new" jobs is substantially less than their monthly disability checks. Why then should they bother to look for work? Welcome to the new "no work ethic". It came to light recently that a judge in the disability courts in Mississippi never denied a claim. He was removed from the bench. Between lax applications of requirements and attorneys taking advantage of existing laws, our Social Security Administration Fund is being rapidly depleted.

Meanwhile, Congress and the Administration are looking for ways to reduce payments to qualified Social Security recipients who have been paying into this fund for many, many years. Does this make any sense? Where is the outrage? When did working to earn income become out of favor?

Rudy Berberian a semi-retired successful businessman (he is still a professor of Economics, part-time, at a local college). You can read all of Rudy's articles or order his book from his web site, The Business Professor Inc..

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