The unexpectedly large number of American workers who piled into the Social Security Administration's disability program during the recession and its aftermath threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues.
U.S. labor force participation rates fell last month to the lowest levels since 1979, the wrong direction for an economy that instead needs new legions of working men and women to drive growth and sustain a Baby Boomer generation headed to retirement.
Economists say relatively few people are likely to trade their disability checks for paychecks, in part because the program doesn't give much incentive to leave. Federal Reserve Chairman Ben Bernanke has worried that the financial crisis would lead to a permanent loss of workers, setting up what economists call hysteresis, a term borrowed from physics to describe temporary market changes that lead to permanent economic losses.
It is no longer a theoretical problem, said David Autor, a professor at the Massachusetts Institute of Technology, who has studied the disability program. The economy has a case of hysteresis, he said, created by the permanent transfer of workers to disability rolls.
Many newcomers to the disability roster are low-wage earners with limited skills, Mr. Autor said, and they are "pretty unlikely to want to forfeit economic security for a precarious job market."