Wisconsin’s central economic challenge is a labor shortage. Despite record employment and a labor force participation rate five points better than the national average, 76 percent of Wisconsin business leaders in a June survey report they are having trouble finding workers. A strategy to meet workforce needs should include a variety of solutions. But the labor shortage and growing economy ought to spur a long overdue reform to federal disability insurance.

Without any corresponding rise in self-reported measures of health and disability among the working age population, Social Security Disability Insurance (SSDI) has experienced troubling enrollment growth. Between 1990 and 2013, SSDI enrollment grew from 5 to 12 million. Since 2013, SSDI enrollment has plateaued and even dropped slightly to 11.7 million.

In Wisconsin, 160,000 disabled workers are enrolled in SSDI. Since 2000, enrollment has nearly doubled.

What accounts for the growth in disability? Economists suggests half of enrollment growth can be attributed to demographic changes like an aging population and an increase of women in the workforce. But the other half is due to the value of benefits for low-wage workers ($1,196 per month plus Medicare), and subjective eligibility criteria.

Half of disabled beneficiaries in 2017 were deemed disabled due to pain or mental disorders. These impairments, while serious, can be hard to define. A 2013 RAND Corporation study found that nearly a quarter of SSDI applicants have conditions so vague that whether they receive benefits depends almost entirely on whether they get an easy or hard initial examiner. The same study says many SSDI applicants would be better off by staying in the workforce.

Furthermore, if an SSDI applicant does not qualify on strict medical evidence, demographic characteristics like age, work experience, education, language ability, and location are considered when weighing whether to offer benefits. Over half of all SSDI determinations in 2017 included “vocational considerations.”

The central problem with SSDI is that for disabled workers who could reasonably make a return to the labor force through training or rehabilitation, there are few incentives and often not enough support.

The Trump administration has demonstration projects in eight states to figure out the best way to keep those who might enroll in SSDI in the workforce. Members of Congress, including Congressman Glenn Grothman (R-WI06), have proposed legislation that would create partial and temporary disability benefits for disabled workers who need support but can be expected to recover.

But to effectively reform disability insurance it needs to move away from Washington and to the states. A new report from the Wisconsin Institute for Law & Liberty suggests using the 1996 welfare reform as a model. Local policymakers could then work in conjunction with business leaders, health professionals, disability advocates, and educators to reform disability insurance. Instead of a one-size-fits-all model, a reform effort could better balance support for disabled workers with the proper incentives for labor force participation.

The Secretaries Innovation Group, led by Wisconsin Secretary of Children and Families Eloise Anderson, has developed proposals on how state-level disability reform would look. Employers who make accommodations for disabled workers to remain in the workforce could receive tax incentives. States could design partial and temporary disability benefits. And, perhaps most importantly, states would be better suited to offer case management for disabled workers who can be retrained and rehabilitated, and early intervention to look for ways to keep disabled Americans working.

Disabled workers need to be viewed as an asset. Right now too much human potential is being sidelined when our state needs everyone participating. With proper reform, Wisconsin can meet the needs of disabled workers while ensuring that those who have the ability to work, can.

 Collin Roth is the Director of Public Engagement and a Policy Analyst for the Wisconsin Institute for Law & Liberty (WILL).