Disability Benefits, Welfare Reform and Employment Policy

C. Lindsay, D. Houston, C. Lindsay, D. Houston

• Publisher: Palgrave Macmillan
• Year: 2013
• ISBN:
  9781137314277
• Topic: Política y relaciones internacionales
• Subtopic: Política social

This book aims to tackle the issues that are central to understanding and addressing one of the most important employment policy problems facing governments in the UK and beyond: the high number of people of working age claiming 'disability' or 'incapacity' benefits.

1

Fit for Work? Representations and Explanations of the Disability Benefits ‘Crisis’ in the UK and Beyond

Colin Lindsay and Donald Houston

Introduction

At the start of 2012, more than two and a half million people of working age were out of work and claiming disability benefits in the UK (see Box 1.1). Since 1979 the numbers on these benefits have more than trebled. Successive governments have argued that the large numbers of people spending long periods on disability benefits represents a social and economic crisis. Beyond the fiscal pressures placed on welfare budgets (which have become particularly acute in the context of recurring recession and public spending deficits), there is evidence that long periods spent on these benefits can further undermine individuals’ health (Brown et al., 2009), increase the risk of poverty (Kemp and Davidson, 2010) and feed into ‘risky behaviours’ (Waddell et al., 2007). From an economic perspective, it is argued that high levels of working age inactivity represent a waste of human capital, as skills and labour are haemorrhaged from the productive economy (Beatty et al., 2010). Finally, population ageing and pressures on pension schemes mean that, in the long term, there will be a need to keep older people working, and working for longer, with the ‘active management’ of health conditions bound to be a key element of any policy solution (Loretto et al., 2007).

Given this context, it is unsurprising that policy makers have expressed a determination to reduce the numbers claiming disability benefits. Recent policy responses in the UK have focused on the reform of disability benefit regulations in order to establish a more ‘active’ disability benefits regime; restrict eligibility; extend means-testing; limit payment levels; and introduce active labour market programmes (Pathways to Work from 2003, and its successor, the Work Programme since 2011).

This book explores whether these policy responses (see Box 1.2) are fit for purpose by: presenting evidence on why benefit rolls have risen and why some people are more likely than others to become long-term claimants of disability benefits; critically assessing the content and outcomes of recent policy in the UK; and comparing experiences in the UK with those of other welfare states. A crucial conclusion is that, while the welfare system can in some instances hinder a return to work, the notion that insufficient work incentives and a lack of activation measures explain why so many people are on disability benefits is fatally flawed. Rather, labour market change and industrial restructuring, alongside individuals’ employability and health-related problems, combine to explain why some people find themselves on disability benefits for long periods.

Box 1.1 What are disability benefits?

For the purposes of this book, we define ‘disability benefits’ as those monetary benefits granted under contributory and non-contributory state schemes and paid to people experiencing long-term sickness, disability or reduced work capacity as means of earnings replacement. This may include some early retirement schemes specific to disability or reduced work capacity (these operate in countries such as Denmark and Germany) and some broader social assistance schemes that have a specific disability component. Our focus is on the main state benefits, and not private disability insurance benefits. This definition is broadly similar to that used by recent cross-national studies (OECD, 2010).

Box 1.2 Disability benefits and employability policy in the UK

The current benefits system for people with health problems arguably has its roots in the establishment of contributions-based Invalidity Benefit in 1971. For people with insufficient National Insurance contributions, support provided because of ill-health traditionally fell under the main general social assistance benefits (until recently Income Support, and before that its predecessors Supplementary Benefit and National Assistance). The first of a series of important reforms took place with the introduction of Incapacity Benefit to replace Invalidity Benefit in 1995. This reform was designed to tighten eligibility criteria via a more rigorous medical ‘all work test’ and stricter National Insurance contributions requirements. Further restrictions were applied with the introduction of the ‘Personal Capability Assessment’ and additional contributions requirements in 1999. Despite these changes, the numbers receiving disability benefits rose steadily during the 1980s and 1990s.

From 2008, new claimants have applied for Employment and Support Allowance, and all existing recipients – chiefly those on Incapacity Benefit – will be moved on to the new benefit by 2013. The new benefit divides claimants into a ‘Work-Related Activity Group’ considered capable of progressing towards employment and mandated to engage in activation programmes (previously participation was largely voluntary); and a ‘Support Group’, assessed as more sick or disabled, who are paid a higher rate of benefit and are excused from work-related activity. An even stricter medical ‘Work Capability Assessment’ has seen the majority of claims for disability benefits rejected, and most successful claimants directed towards work-related activity. The first large-scale activation programme directed specifically at Incapacity Benefit claimants was ‘Pathways to Work’, rolled out from 2003 to 2008. In 2011 Pathways to Work was replaced by a single ‘Work Programme’ providing activation for claimants of all working age benefits.

The comparative element of this book is important because high levels of disability claiming are not unique to the UK. Social democratic states such as Sweden (Hytti, 2006) and leading ‘active’ welfare states like the Netherlands (Koning and Van Vuuren, 2007) have faced similar problems, and even the liberal US welfare state, despite limited spending on benefits, saw a rapid growth in ‘social security disability’ in the 1990s and 2000s (Autor and Duggan, 2006). Meanwhile, other countries represented in this volume, such as Germany and New Zealand, have managed to avoid (Germany) or limit (New Zealand) the growth of large benefit rolls, but face substantial problems of working age sickness and disability (OECD, 2010).

If policy makers in the UK and beyond are to get to grips with the disability benefits crisis, then they first need to appreciate the nature of the problem; and then assess the evidence on what might work (and has previously worked) in terms of policy solutions. We set ourselves the same challenge in this book. We have gathered evidence from experts in a wide range of disciplines including economic geography, social policy, sociology, occupational medicine, and public health studies. We also present comparative perspectives from four welfare states beyond the UK.

The remainder of this chapter sets out one of the central issues for the book – that the disability benefits crisis in the UK and beyond can only be understood as the result of a combination of three key factors:

• labour market processes of job destruction, polarisation, and work intensification that have limited opportunities for work in post-industrial labour markets, particularly for those with poor health;

• gaps in individuals’ employability and skills that mean they are left at the ‘back of the queue’ for those jobs that are available; and

• health problems that both explain why people claim disability benefits in the first place and limit their prospects of returning to work.

The UK evidence on these three interconnected issues is unpacked in Chapters 2 to 7, before we assess their relevance in other welfare states, and finally outline issues for policy. We first set the scene by providing more detail on how the disability benefits ‘crisis’ has been represented and misrepresented and on how the three themes of the book – labour market change, employability, and health – interact to leave many people claiming disability benefits for long periods.

(Mis)Representations of the disability benefits crisis

According to the UK’s General Household Survey, around 15% of the working age population have a limiting long-term illness or impairment, a proportion that has remained fairly constant since the 1970s. Approximately half are currently employed, down from almost two-thirds in 1980 (Berthoud, 2011). Disability benefits claimants rose from below 3% of the working age population in 1980 to 7.7% in 2010. Assuming that the overwhelming majority of claimants would report a limiting long-term illness, almost half of sick and disabled people in the UK are therefore in receipt of disability benefits. Of those claiming benefits, over 80% say their health means they can either do no work or substantially limits the amount or type of work they could do (Beatty et al., 2009).

In what respect – indeed if at all – this situation can be represented as a ‘crisis’ depends very much on one’s point of view. From the government’s perspective, the ‘crisis’ is the increase in the numbers claiming such benefits and the associated cost to the taxpayer over the last 30 years (DWP), 2010). From a social justice point of view, the ‘crisis’ is that the employment rate of the sick and disabled is significantly lower today than 30 years ago (Berthoud, 2011). From a social exclusion point of view, the ‘crisis’ is low income levels on benefits and the large numbers claiming concealing the true extent of involuntary worklessness (Beatty and Fothergill, 2012). From an economic point of view, the ‘crisis’ is cast as lost labour supply and increased pressure on pension schemes already stretched because of population ageing (OECD, 2010). On the other hand, the situation may not be seen as a ‘crisis’ at all, but merely a reflection of appropriate mechanisms of social protection for the sick and disabled who are unable to work in an increasingly competitive labour market.

The dominant rationales for policies to deal with the disability benefits crisis are arguably to reduce the cost to the state and to place more economic responsibility on citizens (DWP, 2010). Political and popular discourses typically revolve around disability benefits being: overly generous; too easily accessible for people who should be ‘insufficiently’ sick to qualify; excessively complex to administer; and too passive in that they do not place enough obligation on recipients to move off benefits (Freud, 2007; DWP, 2008, 2010; OECD, 2010). Thus, there is an assumption behind recent welfare reforms in the UK and beyond that the root cause of the high numbers claiming lies with the nature of the benefits system itself and its influence on the behaviour of individuals. These ideas are closely linked to the notion of ‘dependency culture’, which lies behind the emphasis on activation, coercion, and ‘responsibilisation’ within welfare reform (Mead, 1986; Halvorsen, 1998; Peck, 2001). If the operation of the benefits system has led citizens to disengage from the labour market – so the reasoning goes – reforms to the system can ‘correct’ undesirable behaviour (Beck and Beck-Gernsheim, 2002). However, this behaviourist reading of the disability benefits problem appears to have run up against a more complex reality.

What factors might explain the disability benefits crisis?

A labour market problem?

The history and geography of disability benefits claiming in the UK indicate very clearly that job availability plays a pivotal role in determining the number of people on disability benefits. Disability benefits claimants in the UK are heavily concentrated in areas of industrial job losses (Beatty et al., 2007; Beatty and Fothergill, this volume). All periods of economic slowdown since the late nineteenth century have coincided with rises in disability insurance/benefit claiming (Macnicol, this volume). This was as true before the introduction of the Beveridge welfare state as it was after. Similarly, in many other states, claims of disability benefits have risen most strongly in the years following economic slowdowns (OECD, 2010).

Beatty et al. (2000, 2009) have made a convincing case that area-specific economic restructuring and ‘job destruction’ in traditional sectors during the 1980s and 1990s came to ‘hide’ unemployment among increasing numbers claiming disability benefits in disadvantaged labour markets, where there have been fewer opportunities available, and where those with health problems and other barriers have been pushed to the back of the jobs ‘queue’. Such processes of job destruction have resulted in persistently high levels of worklessness and claiming of disability benefits in depressed urban labour markets (Webster, 2005), seaside towns (Beatty and Fothergill, 2004), former coalfield communities and industrial towns (Beatty and Fothergill, 2005) and some rural areas (Beatty and Fothergill, 1997).

There is a strong evidence base to support this theory. First, survey evidence suggests that there is little ‘different’ about the health or personal characteristics of people on benefits in ‘high disability rate’ labour markets – it’s just that there are lots more of them (Brown et al., 2009). Second, spatial inequalities have remained remarkably consistent over time. The areas reporting the highest levels of benefit claiming barely changed from the early 1990s to the middle of the first decade of the 2000s (Beatty and Fothergill, 2005) and similar inequalities remain in place today (Beatty et al., 2010). These differences between areas seem resistant to changes to the benefits system (Lindsay and Houston, 2011), and to the introduction of active labour market strategies (Webster et al., 2010).

It would be simplistic, however, to suggest that job availability alone explains the patterns and trends in benefit claiming. In the UK, industrial redundancies largely affecting men in manual occupations explained a lot of the increased inflow onto disability benefits in the 1980s and early 1990s, which was dominated by men over 50 years of age in industrial districts. Since the mid-1990s, however, the inflow has come to be more varied with women and younger workers (aged 35–50) claiming in greater numbers. In parallel, poor health has replaced redundancy as the most common reason for job loss among disability claimants, and anxiety and depression have become more prevalent among claimants (Beatty et al., 2009). Despite these changes in the characteristics of claimants, the geography of claiming in the UK – including the inflow since major reform in 2008 – has remained heavily concentrated in areas of former industrial job losses that continue to be characterised by sluggish economic growth (Lindsay and Houston, 2011). This suggests that through time shortfalls in labour demand are transmitted onto those least able to compete for scarce jobs (Beatty et al., 2009).

Deindustrialisation has led to a reduction in the number of hazardous work environments in the labour market, which could be expected to reduce levels of disability among the working age population. Yet reported levels of disability have remained constant since the 1970s. An explanation may be that there has been an intensification of work and the emergence of new occupational hazards in the service sector relating more to mental than physical stress (Baumberg, 2012). Consistent with this ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Notes on Contributors
• 1 Fit for Work? Representations and Explanations of the Disability Benefits ‘Crisis’ in the UK and Beyond
• 2 Disability Benefits in the UK: An Issue of Health or Jobs?
• 3 A History of Work-Disability
• 4 Are Incapacity Benefit Claimants Beyond Employment? Exploring Issues of Employability
• 5 Redefining ‘Fit for Work’: Welfare Reform and the Introduction of Employment Support Allowance
• 6 A Health Problem? Health and Employability in the UK Labour Market
• 7 The Interaction of Health, Labour Market Conditions, and Long-Term Sickness Benefit Claims in a Post-industrial City: A Glasgow Case Study
• 8 The Impact of the UK’s Disability Benefit Reforms
• 9 Germany: Attempting to Activate the Long-Term Unemployed with Reduced Working Capacity
• 10 Incapacity Benefits – Change and Continuity in the Swedish Welfare State
• 11 From Dutch Disease to Dutch Fitness? Two Decades of Disability Crisis in the Netherlands
• 12 New Zealand’s Reform of Sickness Benefit and Invalid’s Benefit
• 13 Fit for Purpose? Lessons for Policies to Address the Disability Benefits ‘Crisis’
• Index