CARDIFF GARCIA, HOST:
One of the most puzzling trends of the last few decades has been the rise and rise and rise in the number of people who fell out of the labor force because they were disabled. These are people who don't have a job, and they are not looking for a job. And disability is the reason why.
STACEY VANEK SMITH, HOST:
And we're not talking about older workers nearing retirement, who might be more likely to have a disability just because of their age. We're talking about young and middle-aged workers. And the number of these disabled Americans went up for so long that the trend seemed like it might be permanent.
GARCIA: But it was not permanent. Today on the show, an economist who's like a straight-up data ninja tells us the story of a quietly dramatic turnaround in the U.S. economy and what we can learn from it.
VANEK SMITH: Are there data samurai?
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GARCIA: Ernie Tedeschi is an economist. He's in the private sector now, but he used to work at the Treasury Department.
You're kind of a data guru - is how I think of you now.
(LAUGHTER)
ERNIE TEDESCHI: I like data. My day job is to do fiscal policy, which is, you know, federal taxes, federal budget and monetary policy. But sort of my hobby is - like you said - to dig into big data sets and just to try to answer interesting questions.
VANEK SMITH: And recently, Ernie started analyzing data from the CPS, the current population survey.
TEDESCHI: You can think of the current population survey as like a mini-census every month. It surveys about 100,000 households across the United States every month. And it's where we get our unemployment numbers from.
VANEK SMITH: Those 100,000 households answer questions like, are you working? And if you're not working, are you looking for work? And finally, if you respond that you are not looking for work, then why are you not looking for work?
GARCIA: The survey offers a few options for how to answer this question. Maybe you've gone back to school, or you're staying home now to take care of a family member. And the option we're talking about today is that you've become disabled. You are too sick or too injured to work, and so you don't look for work.
VANEK SMITH: And for his analysis, Ernie focused on Americans between the ages of 25 and 54. These people are at an age where you would expect them to be in the labor force - either working or looking for work. But they're not in the labor force, and disability is the reason why.
TEDESCHI: You know, we have the data going back to 1994. It was already on an upward trend then. It kept going up throughout the tight labor market and good economy of the late '90s. It went up faster as a result of - you may remember the tech bubble bursting - you know, the 2001 recession. So it went up faster after that. But then it kept going up during the recovery after 2001.
VANEK SMITH: Ernie says the trend started to look permanent. And this really troubled economists because it seemed like such a dispiriting trend. And there was no evidence that even a strong economy would change it - that people who had left the labor force because of disability would ever come back to the labor force even if the economy was really strong, and there were lots of jobs.
GARCIA: Ernie says it's also possible that a lot of these people felt like they might be discriminated against if they did look for work. Companies are legally not supposed to discriminate against people with disabilities, but it does happen.
VANEK SMITH: Another possibility is that a lot of these disabled people were receiving disability benefits, and they would lose some of those benefits if they started earning money in the workforce. It just wasn't clear exactly what was happening.
GARCIA: What we do know is that this number of people citing disability as the reason for being out of the workforce, it went from fewer than 5 million people in 1994 all the way up to 7.3 million people by 2014. Ernie says it was climbing for both men and women and for people from all racial backgrounds.
VANEK SMITH: But then in the middle of 2014, that number finally and unexpectedly started to fall.
TEDESCHI: Since July of 2014, that head count of the number of people out of the workforce due to disability has come down by 600,000 people. It's never done that - at least since 1994, since the current way that we measured disability began in the current population survey. Seven percent of the head count has come down.
VANEK SMITH: And that 7 percent decline is today's Planet Money INDICATOR - a 7 percent decline in the number of people who are kept out of the labor force because of a disability.
TEDESCHI: It's clearly now a different trend, and something dramatic has happened to this population.
GARCIA: It's an unprecedented decline - at least for the period in which we have the data. And Ernie says there are two reasons why the number has fallen. First, some people answering this survey have switched the reason they give for being out of the labor force. They've switched from disability to, in most cases, saying they're home taking care of the family. So they are still out of the labor force. They've just changed the reason why they're out of the labor force. We don't know exactly why they switched the reason.
TEDESCHI: Half of the decline since July of 2014 has been due to - I guess reason switching is what you would call it.
GARCIA: And the other half?
TEDESCHI: The other half of the decline is due to job finding, which we would generally view as a positive thing in the economy.
GARCIA: Yeah, they were getting jobs - great news for the economy. But it does raise a question. The number of disabled Americans leaving the workforce had previously climbed not just during recessions but also when the economy was recovering, when it was growing - kind of like now. So what makes the current economic recovery different - so different that it's led to disabled people reentering the workforce?
VANEK SMITH: The results of the survey don't tell us. And we don't know for sure. But one strong possibility, Ernie says, is simply that the labor market has finally become strong enough that employers are more willing to hire disabled workers than they used to be.
TEDESCHI: You have to think from the business's standpoint here. If I'm trying to hire people, I want to - I may want to avoid raising wages as long as I possibly can because that eats into my profit margin. In many cases, it means I would have to raise wages for everybody in my firm. It can be expensive. So one thing that may be going on here is firms may be willing to accommodate disabled workers because the labor market is so tight - because, from their perspective, it means they don't have to give - they don't have to raise wages yet in order to get the workers that they need. They can tap into this supply of disabled workers who are now looking for work and be able to accommodate them whereas before, when there were lots and lots of different people who didn't have jobs, they didn't have to make those accommodations.
GARCIA: This might be kind of a mixed bag. It's obviously great that more people are getting jobs when they want them. But it's also the case that formerly disabled people who get jobs tend to be paid less than other employees. How much of that difference is because of discrimination? Ernie says he doesn't actually know yet, but he is now working on another analysis to shed light on this very question.
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GARCIA: A very grateful hat tip to The New York Times Upshot section - that is where we came across Ernie's analysis - and a note that the INDICATOR is off tomorrow because it's a stock market holiday. We'll be back with a brand-new episode on Monday. This podcast is edited by Paddy Hirsch and produced by Darius Rafieyan. Thanks for listening. Have a great weekend.
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