Male labor force participation and the social security disability program.

Abstract

In an article in thisJournal, Parsons (1980a) analyzes the doubling in the rate of' nonparticipation in the labor force of older men since 1946. Using cross-sectional data from the National Longitudinal Survey (Parnes et al. 1970) in an index function model of the labor force participation decision, he tests the assertion that the withdrawal of older males is attributable to the rapid expansion of alternatives to work provided by the Social Security Disability Insurance (SSDI) program. He reports an elasticity of nonparticipation with respect to the replacement rate of' SSDI benefits of' .631 and concludes that the recent decline in labor force participation can be "largely explained by the increased generosity of' social welfare transfers, particularly Social Security disability payments" (p. 130). The magnitude of Parsons's estimate and its impact on the public debate over disability transfer policy require careful scrutiny of' its basis. In Section I, we describe Parsons's econometric model and construction of' variables; in Section II we provide a critique. In Section III, we test the robustness of Parsons's elasticity estimate by presenting alternative estimates based on corrections and extensions of his basic model. Section IV concludes.