The Effect of The Minimum Wage on Disability Insurance Recipients

Abstract

This paper estimates the effect of minimum wages on the number of Disability Insurance (DI) recipients using 108 large state-level minimum wage changes between 2002 and 2016 in the United States. We present minimum wage increases as an alternative to often ineffective DI "return-to-work" policies. Results are estimated using a event-study differences-in-differences approach. We estimate results for the percent of people who receive DI, the number of applicants and the average monthly benefit amount in a state. We find very little effect of the minimum wage on any of these facets of DI. We find statistically insignificant decreases in the number of people who receive DI and in applications. At the same time, we conclude that approved applications do not decrease, this is coupled with a statistically significant increase in the overall acceptance rate of applications indicating that minimum wage changes do effect the pool of applicants to DI programs. Lastly, we find the surprising result that average monthly benefits decrease after a minimum wage increase. This can largely be contributed to endogeneity in the model.