DISABILITY INSURANCE STIFLES HUMAN POTENTIAL

The following information was released by the Independent Institute:

Americans who could have productive work lives instead sit at home sucking from another federal welfare system.

By Scott Beyer

December 28, 2025

A recent job inquiry we received at the construction company I work for illustrates the bad incentives caused by modern federal disability programs.

The man who contacted us has been in and out of illness for yearsenough to qualify for disability insurance. Yet he is still capable of work, doing part-time carpentry for others.

But we cannot procure him because of his disability status. Hiring him could expose both him and our company to legal risk, and he cannot license or insure his business without jeopardizing his benefits, since such programs treat work as evidence of fraud rather than rehabilitation. His only rational choice is to remain officially "disabled"and not work at all, at least not on the books.

There are many such cases.

Because I work in construction, I have frequent dealings with working-class people who are on the margins. Many of them have suffered through workplace injuries or mental conditions such as autism.

They may not be fully capable of supporting themselves, but are also not incompetent, nor do they want to sit at home all day.

Yet the federal disability system does not recognize these nuances. It demands a binary classification: you are either fully disabled, or not at all. There is little room for partial capacity or gradual reintegration.

The result is a system that pushes people toward full-time idleness, under-the-table work, or outright fraud. It robs millions of people of their human potential while forcing the rest of society to shoulder the cost.

To understand how we arrived here, let's note the origins of federal disability programs. Social Security Disability Insurance (SSDI) was created in the mid-20th century with humane intentions: to provide a safety net for workers who were genuinely unable to continue due to severe injury or illness. SSDI works like actual insurance, in that U.S. workers fund the program via payroll taxes. The benefits that an individual qualifies for depends on how much they paid in, and are meant to be conditional on health status. Supplemental Security Income (SSI) followed and is more permanent in nature, targeting those with little work history and minimal resources.

Over time these programs expandedboth in eligibility and interpretation. Administrative standards loosened, with political pressure pushing agencies to err on the side of approval rather than denial.

Today, nearly 13 million people under age 65 receive SSDI and/or SSI benefits, and program payments in 2025 hit $63 billion.

While many cases are legitimate, the definition of disability has grown more elastic. Disorders whose severity are often difficult to verify now account for a large share of new claims; depression-related claims make up about 12% of overall claims. This has produced predictable and deeply troubling outcomes.

The first is rampant slothfulness.

Anyone who lives in a large American city knows the scene: a crowded park in the middle of a weekday afternoon, filled with able-bodied adults sleeping on benches, loitering, or causing trouble. Chances are, a number of them collect disability.

They may look capable of workand often arebut through prolonged interaction with government bureaucracy, have learned to present themselves as incapable. Disability has become less a physical description than a bureaucratic status.

But not everyone on disability wants this existence.

Many recipients are capable of work. The problem is that they are not productive enough to safely rejoin the full-time workforce without losing the permanent security of their disability benefits. So they live in the shadows, taking odd jobs and accepting cash rather than keeping an electronic trail of remittances. The more capable among themlike the carpenter who contacted uscould in fact run valid businesses, hire employees, pay taxes, and build something lasting. Instead, they are more prudent to remain small, informal, and under-marketed.

But worst of all is the outright fraud.

There have been several high-profile cases of co-conspirators, such as the aptly-named Eric Conn, a Kentucky disability lawyer who helped clients who were not actually disabled to submit claims. Between 2004 and 2016 this led to $500 million in fraudulently awarded benefits, which Conn benefited from by taking contingency fees, before he was sentenced to 12 years of prison in 2017.

At a more granular level, most peopleespecially those in the aforementioned working-class demographicknow someone who is clearly not disabled but is abusing the system through exaggerated symptoms. Entire cottage industries exist around coaching applicants through this process.

Federal disability programs need serious reform namely the ability to assess the competency of different individuals and how much support they really need. One of the most enduring efforts is the Ticket to Work program, created in 1999. It gives most SSDI and SSI recipients a chance to re-enter employment by allowing, for example, a 9-month test work period that won't affect their benefits.

But if 1 in 20 working-age people collect disability, this clearly has not spurred a mass exodus from these programs. And given this rampant mass dependency, one could argue that the program is fundamentally broken and needs disbanding. States could be left to form their own disability programs, as was partially done with general welfare in the 1990s.

At their core, SSI and SSDI have created a moral hazard, as working people are forced to subsidize those who have little incentive to work. Nor are these programs even good for the disablednamely those with mental disabilities. Work provides purpose needed to stay mentally and physically sharp, and by discouraging it, the federal government has accelerated the decline of millions of people.