Aligning Substantial Gainful Activity (SGA) Thresholds with State Minimum Wages

A pathway to meaningful employment and economic inclusion for people with disabilities

Executive Summary

This policy proposal calls for the Social Security Administration (SSA) to revise how Substantial Gainful Activity (SGA) thresholds are calculated. Instead of relying on a static, federally determined benchmark, SGA should be indexed to the minimum wage of the state in which the beneficiary resides. This simple adjustment would eliminate regional inequities, reduce work disincentives, and create a more inclusive economic environment that supports self-sufficiency for individuals with disabilities—while also benefiting the broader public through increased tax contributions and reduced long-term dependence on government programs.

Targeted Challenge

The SGA threshold is the income limit that the SSA uses to determine whether a person is “disabled enough” to qualify for or retain Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). As of 2024, the SGA for non-blind individuals is $1,550/month, regardless of where they live. However, states like California have significantly higher minimum wages, $16.50/hour as of mid-2024, which means people with disabilities can unintentionally exceed the SGA threshold by working as few as 23–25 hours per week at minimum wage.

This static federal cap results in:

• A geographically inequitable system

• A disincentive to work or accept promotions

• A one-size-fits-all policy for a population with varying needs and abilities

• Lost tax contributions and suppressed economic output

Policy Solution

MEI recommends adjusting the SGA threshold to reflect each state’s minimum wage, creating a more accurate and location-sensitive definition of "substantial" employment.

Proposed SSA Formula:

SGA = State Minimum Wage × 30 hours/week × 4.33 weeks/month

This formula assumes part-time, moderate employment as a healthy benchmark and gives individuals the freedom to participate in the workforce without being prematurely disqualified from benefits.

Economic Impact

1. Increased Tax Contributions

Raising SGA thresholds allows individuals with disabilities to work more hours legally and confidently, leading to:

• Increased payroll tax (FICA) contributions

• Higher federal and state income tax revenue

• Increased consumer spending and local sales tax generation

2. Reduced Long-Term Government Spending

Individuals who gradually transition to stable work often:

• Reduce or eliminate their reliance on SSDI/SSI by gaining financial independence

• Require fewer public services (e.g., Medicaid, housing assistance)

• Experience better health outcomes, reducing public healthcare costs

3. Stronger Workforce Participation

Employers benefit from a larger, more stable labor pool and can confidently hire disabled workers, offer longer hours or promotions to workers with disabilities, all without triggering benefit losses.

Implementation Pathways

1. Administrative Reform (Primary Approach)

• SSA revises SGA calculations through rulemaking, using existing wage data from the U.S. Department of Labor

• Annual SGA updates occur alongside SSA’s cost-of-living adjustments

• Beneficiaries are notified of their state-specific SGA thresholds through the SSA portal or annual correspondence

2. Legislative Support (Secondary Approach)

• If administrative change is not pursued, Congress could amend the Social Security Act through a bill such as the “State-Adjusted SGA Act”, formally authorizing state-indexed thresholds

Case Study

Jordan, 30, lives with mild cerebral palsy in California. He receives SSDI and recently began working as a front desk assistant at $16.50/hour. He works 20 hours/week, earning:

$330/week × 4.33 weeks = $1,428.90/month

He is just under the federal SGA limit of $1,550. If he accepts just one additional shift, he risks losing his SSDI benefits.

Jordans Current Total Income and Tax Contributions

On the left is a representation of Jordans total income and his tax contributions. Due to the current SGA:

• Jordan is de-incentivized to work more hours

• Over 50% of Jordans monthly income will be lost if he works extra shifts

• Due to his essential need for low weekly hours, Jordan is seen as lazy, unreliable, and less dependable by employers - in addition to societal barriers due to his disability

Jordans Income and Tax Contributions - After Increasing SGA

Estimated 10 year Tax Revenue - Post SGA Raise

Model 1 - Currently Employed Individuals Increasing Work Hours by 10 per week

Model Information

Location: Nationwide

Population: Working individuals, receiving SSDI, increasing weekly hours worked by 10 hours, increasing income (after raise in SGA).

Population Size: 1.35% of current SSDI recipients (100,000 out of 7.4 Million, 2024)

Duration: 10 year forecast

Average Wage: $15/hr

Approximate Increase in Taxable Income Per Person: $7,800

New Estimated Tax Revenue Per Person: $3,120

Estimated Tax Revenue: $312,000,000/year

Accumulated Tax Revenue: 3.12 Billion Dollars

Cost to Federal Government: $0