The Impact of Past Incarceration on Later-Life DI and SSI Receipt

Abstract 

In the three decades from 1980 to 2010, there was a steady rise in the number of men receiving Social Security Disability Insurance (DI) benefits.  The number of beneficiaries peaked in 2012 and has declined significantly since the end of the Great Recession, tracking very closely the (pre-pandemic) fall in the national unemployment rate and improvement in other labor-market fundamentals.  Although general population aging and the business cycle have had clear effects on the number of recipients, one factor that has gone relatively understudied is the aging of the formerly incarcerated population.  This paper examines the relationship between past incarceration and later-life DI and SSI receipt, as well as poverty status.  To isolate causal effects independently from other factors, this analysis uses detailed micro-data from three nationally representative surveys—the Health and Retirement Study (HRS), National Longitudinal Survey of Youth 1979 Cohort (NLSY79) and the American Community Survey (ACS)—and a novel econometric identification strategy.  The strategy relies on the timing of the entry of crack cocaine in the 1980s that differed across locations (states) to form an instrumental variable for the likelihood of incarceration. 

The paper found that: 

• Past incarceration reduces the career years of employment, in general, and the likelihood of meeting the DI duration test, in particular, reducing eligibility for DI. 
• Given the likely reduction in eligibility, however, past incarceration leads to a 30-percentage-point increase in the likelihood of applying for DI or SSI benefits, with an 18-percentage-point increase in the likelihood of benefit receipt. 
• Past incarceration raises by about 20 percentage points the likelihood the individual is in poverty as measured by the federal poverty threshold. 

The policy implications of the findings are: 

• At the aggregate level, DI rolls are about 300,000 higher for 50-61-year-old men because of past incarceration; SSI rolls are about 50,000 higher. 
• Incarceration has resulted in about 375,000 additional men between 50 and 61 years of age being under the federal poverty threshold in the 2010-2016 period. 
• These results imply that the decline in aggregate DI receipt since 2012 was partially blunted by the decline in incarceration then and the consequent rise in the number of ex-prisoners in the civilian population.