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What happens when you take away disability benefits from kids and their parents

Kids don't earn more when their disability checks disappear — but their parents do.

Supplemental Security Income is the closest thing the United States. has to traditional cash welfare. It’s intended for people who are disabled who are also extremely poor. If you qualify, the federal government will pay up to $721 a month, or $8,652 a year. That’s hardly enough to live on, but it helps.

SSI is a substantial program. It costs the federal government over $50 billion dollars a year to cover nearly 7 million adults and 1.3 million children. To put this in perspective, the federal food stamp program, SNAP, costs about $80 billion. NASA’s budget is $17 billion.

“This has become the new welfare,’’ MIT economics professor David Autor told the Boston Globe in 2010.

Unlike Social Security Disability Insurance, SSI doesn’t require you to have paid into the system before you collect benefits. The decision is based entirely on your medical status and need. Just the children’s share of SSI is roughly $10 billion.

It’s here where the controversy erupts.

Critics argue that the system tempts parents into getting their children diagnosed with a disability just to collect the welfare. In 2010, the Globe profiled parents who believed that their children had better shot of qualifying for SSI if they were on prescription medication.

In a 2012 New York Times column, Nick Kristof warned of parents taking their children out of literacy classes in order to keep their SSI benefit. “Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability,” he wrote.

Until recently, though, research has been sparse on the effects of SSI on parents and children.

Last month, Manasi Deshpande, a doctoral student at MIT, released drafts of two studies that tackle important questions about how SSI impacts people’s decisions to work. How do children and their parents respond when welfare is taken away? Do they work more? Are they even able to work more?

How does SSI affect children after they grow up?

Deshpande’s first paper looks at the effects of SSI on children as they turn 18 and become adults. What happens when, suddenly, your lose your benefits?

It tends to be much harder to qualify for SSI as an adult, which requires people to demonstrate that they cannot work. These days, only about 60 percent of children on SSI make it into the program as adults. Before 1996, though, children tended to stay on automatically.

There’s some history here: In 1990, a Supreme Court decision made it much easier for children to get SSI benefits for behavioral or developmental disorders such as attention deficit hyperactivity disorder, autism or depression. So between 1990 and 1996, the number of children receiving SSI nearly tripled, to over 900,000.

In response, the 1996 welfare reform law tightened eligibility rules. The law made it mandatory that children be reevaluated for SSI once they turned 18.

Aug. 22, 1996 became the magic date: Any child who turned 18 after that date would have to requalify for SSI under the more stringent adult rules. Children who had turned 18 before then weren’t forced through that process.

Deshpande studied children who turned 18 in the nine months before and after the cutoff. Depending on the random luck of their birthday, there was a huge difference in their chances of staying on SSI:

Here Deshpande had identified two very similar groups, half of whom were affected by the new law, and half of whom weren’t. This was a natural comparative situation, from which she could investigate the effect of losing SSI upon becoming an adult.

Her study indicates that losing SSI is a huge blow. Taking away SSI benefits from someone after they turn 18 does cause them work more; but they don’t (or can’t) work enough to make up for the loss in income.

On average, former SSI recipients in the study earned an additional $2,600 a year, but the average SSI benefit was well over $7,700 a year. So, these people ended up poorer and with incomes that were more volatile. Deshpande found that they might earn a lot one year, and nothing the next, which is a painful way to live.

For context, Deshpande makes a comparison to people who come from low-income backgrounds, but who never qualified for disability as children. These non-disabled people tend to earn much more money, and their incomes grow as they get older. (Their trajectories are marked in blue.) People who were on SSI as children make much less money, and they hardly see their incomes take off, regardless of whether were removed from SSI as adults. (Their trajectories are marked in gray and orange.)

These days, learning disabilities or mental health disorders are by far the most common reason that children qualify for the SSI, and these children are also more likely to leave the SSI rolls upon turning 18. Deshpande’s paper provides some evidence that these people suffer substantially from losing their benefits, to an extent that they cannot make up for by working.

How does SSI affect how much parents earn?

Deshpande’s second paper looks at what happens to parents’ earnings when their younger children lose SSI eligibility.

In addition to the medical reevaluation at age 18, the Social Security Administration also periodically checks in on children’s cases while they are growing up. Sometimes it decides that they no longer qualify for SSI.

In 2005, though, there was a large cut in the Social Security budget, meaning that many fewer cases were reviewed. Children after 2005 were much less likely to get kicked out of the program. Again, by looking at people before and after the cutoff, Deshpande could measure the effect on the family if a child lost her SSI benefits.

Deshpande found that kicking a child out of SSI caused the parents to work harder to make up for the lost income. In fact, they worked enough to replace all or more of the welfare that was taken away.

What should we think of SSI?

Let’s review what we’ve learned.

In her first paper, Deshpande showed that people who were on disability as children are truly disadvantaged, and they do not have great work prospects as adults. Taking away their benefits when they 18 encourages them to earn a little bit more money, but not much more, and not enough to replace the money that was taken away.

In her second paper, Deshpande showed that the opposite is true of the parents of disabled children. The parents do have excess capacity to work. If the SSI benefit is taken away from their children, parents will work harder to replace that money.

Deshpande is careful in both her studies to avoid speculation. But let’s speculate for a moment.

Welfare is criticized because people think it encourages bad behavior. Old-fashioned welfare required you to show that you were poor. Maybe you cut back on work in order to qualify; that’s a perverse incentive.

But SSI requires you to show not only that you are poor but that you or your child is disabled. There are two perverse incentives here.

Deshpande’s first paper suggests that we should take seriously the children who display significant learning disabilities or mental disorders. Currently, the system tends to consider them capable of work when they turn 18; but Deshpande’s paper shows that they might not be as capable as we think. These children may need more help.

Deshpande’s second paper shows that even families poor enough to qualify for SSI do have the means to earn extra money if forced to. A miserly reaction might be that we should not hand out disability checks to children if it’s just going to encourage their parents to shirk work. A more generous reaction would be that parents should naturally want to work less if they can, in order to devote more time to their disabled child.

Determining the future of the SSI program starts with research like Deshpande’s. But the research can only guide us to further questions, ethical ones: How much, as a society, do we want to support families with disabled children? What even counts as a disability?