Transcript Compass conference 25 June 2011

Disability and social security: time for a new realism
Declan Gaffney
Presentation for Compass conference
25 June 2011, updated September 2011
Summary
•
It is well known that receipt of incapacity benefits rose dramatically during the 1980’s and early
1990’s as mainly older workers were diverted off unemployment benefit
•
It is also widely believed that there was little change to the IB caseload over the last fifteen years
despite low unemployment, and this has encouraged the view that there is something about IB as
that leads to ‘welfare dependency’, leading to calls for radical reductions in caseload numbers.
•
In fact, controlling for population change, receipt of IB-only (without a disability benefit) fell by 25%
between 2002 and 2010. Rates of receipt fell most dramatically in areas which had previously had
the highest rates. Labour’s third-term reforms contributed very little to these changes.
•
Over the same period there was a rise of 5% in receipt of IB combined with a disability benefit,
controlling for population change.There was also a large rise in receipt of disability benefit without
IB.
•
There is little evidence to support the ‘dependency’ theory of IB receipt or policies based on this
theory.The priority should be with improving employment chances for those with longer-term and
more severe conditions, who form an increasing share of the caseload. ‘Putting people through
their paces’ (D. Cameron, July 2011) has little to offer.
Thirty years of welfare and disability
Standard story on sickness and disability benefit runs like this
•
1980’s and early 1990’s saw huge rise in claimant numbers as government encouraged
unemployed workers to exit the labour market for economic inactivity
•
Despite rise in employment under Labour, incapacity benefit caseload remained very high and
Labour was slow to introduce reforms
•
In 2010 Labour paid a heavy electoral price for failure to reform IB early enough
•
There is therefore a political consensus on tough policies to reduce IB caseloads
Thirty years of welfare and disability
•
How plausible is the story?
•
It leans heavily on one overriding explanatory factor: ‘welfare dependency’ as a driver of economic
inactivity.
•
It ignores demographic change
•
By focussing on IB in isolation, it fails to consider the effects of other policies which would be
expected to impact on IB receipt, such as tax credits and the minimum wage
•
It says nothing about disability prevalence, severity or trends
Thirty years of welfare and disability
•
So we need a more rounded picture putting sickness and disability benefits into a broader context
•
First we look at welfare and employment under Conservative governments
•
Then we look at what happened under Labour
Source: Grubb, Singh, Tergeist (2009)
Sickness and disability benefits and claimant unemployment UK
1980-2004
9
8
7
rate (%)
6
5
4
3
2
1
0
1980
1985
1990
Sickness & disability
1995
Claimant unemployed
2000
2004
Welfare and employment under the Conservatives
•
The impact of weak labour demand and deindustrialisation between 1980 and 1995 fell
particularly on three groups: young people, lone parents and older male workers.
•
Both lone parents and older workers were incentivised by welfare policy to exit the labour market
for so-called ‘inactive’ benefits (income support, incapacity benefits).
•
Lone parent employment fell from 63% in 1979 to 44% by the time the Conservatives left office
(Blundell 2011).
•
Economic activity for older men (age 55-59) fell from 92% to 75% between 1980 and 1995 (ILO
activity dataset).
Welfare and employment under the Conservatives
•
By the 1990’s there was a consensus that a significant share of the IB caseload was accounted
for by people who had no serious impairments, although this was rarely quantified.
•
On the left, this was initially widely interpreted as ‘hidden unemployment’, concentrated in former
industrial and mining areas- a ‘labour demand’ interpretation (Beatty et al. 2009).
•
on the right (and later on the left) as ‘welfare dependency’ (a labour supply interpretation).
•
In the event, it was what the two interpretations had in common- their focus on labour marketsthat was to have the most influence on later welfare reform.
Welfare and employment under the Conservatives
•
But over the same period (1980-1995) there had also been an increase in the population
prevalence of disability.
•
This trend was misinterpreted: it was widely assumed, without evidence, that it was driven by less
severe conditions and impairments, reinforcing the hidden unemployment/welfare dependency
narratives around IB.
•
Recent analysis indicates that the trend was driven by increased prevalence at all levels of
severity (Berthoud 2011).
•
So while policy and labour market conditions played major roles in increasing IB receipt, that is
not the whole story.
What happened under Labour?
•
Labour came to power determined to reverse the rise in economic inactivity under the
Conservatives. At the same time, labour market conditions were vastly improved post-1995, with
unemployment falling to its lowest level for a generation.
•
But over time a striking contrast emerged between the two main ‘inactive’ groups: lone parents
and IB recipients.
•
Lone parent employment rose rapidly, from 44% to 57%, leading to a sharp fall in benefit receipt.
•
Incapacity benefit numbers increased slightly in the late 90’s and fell very little in the new century
Source: DWP 5% sample and WPLS
Receipt of main benefits 1997-2011 (1997=1)
1.2
index of number of claims
1.1
1
0.9
0.8
0.7
0.6
0.5
0.4
1997
1998
1999
2000
2001
2002
2003
Claimant unemployed
2004
2005
2006
Sick & Disabled
2007
2008
2009
Lone parent
2010
2011
Source: DWP 5% sample and WPLS
Incapacity benefit caseload 1995-2010
3,000,000
2,800,000
2,715,090
2,600,000
2,568,400
2,477,700
2,538,570
2,400,000
2,200,000
2,000,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
What happened under Labour?
•
By 2005, Labour ministers were convinced that the IB caseload represented both a political
liability and a failure of welfare policy to impose enough responsibilities on claimants
•
However Labour’s third term IB reforms were not primarily about compulsion, and the broad
principles adopted commanded wide support among disabled people and organisations
•
However the new Work Capability Assessment eroded confidence in the new system, with a high
rate of successful appeals against negative decisions (40%)
•
Impact of reforms impossible to quantify at this stage because they coincided with the onset of
recession
What happened under Labour?
•
The apparent stability of the IB caseload under Labour was illusory. Beneath the headline figures,
there were significant shifts in the composition of the caseload and in rates of receipt
•
Rates of receipt for older men fell rapidly
•
The concentration of IB claims in former industrial areas, while still important, reduced
considerably (McVicar 2009)
•
There were contrasting trends for IB-only and IB combined with disability benefits (DLA)
Decomposition of change in IB/ESA and DLA receipt by age and gender (age 16-64)
2002 to 2010
change due to
Male
IB/ESA only
change in rate of receipt
-297,310
population change
65,040
All DLA
Female
All
-108,491
18,941
-405,801
83,981
change in rate of receipt
population change
69,016
69,764
111,767
24,853
180,784
94,616
change in rate of receipt
population change
-8,129
57,819
65,085
18,105
56,955
75,925
change in rate of receipt
population change
77,146
11,944
46,683
6,747
123,828
18,692
of which
IB/ESA combined with DLA
DLA only
What happened under Labour?
•
Among those not in receipt of DLA caseloads fell rapidly from 2002, as labour market theory
would predict. Numbers reduced by 20% between 2002 and 2010, and by 25% controlling for
population change. For men, who had tended to have higher rates of receipt, numbers fell by 31%
controlling for population change, and by 17% for women.
•
These falls were partly offset by increasing numbers of women receiving IB/ESA combined with
DLA. This may be due to more women meeting IB/ESA contribution or income conditions,
combined with a higher increase in DLA for women.
•
DLA recipients now account for over half of all IB claims, compared to a third in 1995.
•
Long-term IB claims are increasingly dominated by DLA recipients (65% of all claims running for
five years or more).
•
The rise in DLA receipt since 2002 is accounted for by (a) high and middle care 29% (b) high
mobility (36%) (c) low care 18% and (d) low mobility 17%.
Source: DWP 5% sample and WPLS
Incapacity benefit caseload by DLA receipt 1995-2010
1,900,000
1,700,000
1,500,000
IB,not receiving DLA
IB,receiving DLA
1,300,000
1,100,000
900,000
700,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Conclusion: time for a new realism
•
Labour market explanations of sickness and disability benefit caseloads aren’t wrong so much as
incomplete.
•
As proxied by DLA receipt, severe impairment now accounts for over half of IB claims, and as DLA
receipt is a crude proxy this if anything understates the position.
•
Thus the current drive to reduce claimant numbers is likely to impact heavily on people with more
severe impairments, and the problems with WCA suggest this is already taking place.
•
Another implication is that the expectations about reductions in caseload numbers adopted by
both current and previous governments (‘a million off IB’) are exaggerated
Conclusion: time for a new realism
•
It seems clear that the IB caseload responded to the improved labour market conditions and work
incentives under Labour, contrary to what is still widely asserted.
•
This, together with the rise in DLA, raises the question of whether there is really much more to be
gained from the strategies of improving gains to work pursued under Labour. Most of the effects of
this approach may already have been banked.
•
However the exhaustion of these strategies does not make the case for greater compulsion, given
that the average level of severity in the IB caseload has risen.
Conclusion: time for a new realism
•
A new realism about the objectives, the potential and the limits of welfare reform in this area is
needed.
•
Rather than being driven by undisciplined expectations about reductions in caseloads or moral
sloganeering, reform should focus on the tough policy questions raised by the prevalence of
impairment at the more severe end of the spectrum.
•
Should the system be aiming to increase employment for people with more severe impairments? If
so, what sort of timeframe should we be thinking of (five years? twenty years?), what sort of
employment (e.g. do ‘mini-jobs’ have a role?), what policy levers (employment law? discrimination
law? in-work support and advice?) and what would be the criteria for success (employment rates?
lifetime earnings? wellbeing measures? health outcomes?).
Conclusion: time for a new realism
•
It also needs to be recognised that the employment penalties associated with disability at all levels
of severity are stronger now than they were thirty years ago (Berthoud 2011).
•
If this is no longer attributable to government policies and badly designed benefit systems, as
argued here, then policy will need to take account of broader labour market factors- earnings
inequality, returns to skills and flexibility are obvious examples.
•
Reducing disability employment penalties, rather than arbitrary cuts to caseload numbers, sounds
like a policy objective that could command support among disabled people- and it would need that
support.
•
An implication is that policies which sap people’s confidence in the system and the help it claims
to offer threaten the objectives of welfare reform itself.
References
Beatty et al. 2009 Beatty C. Fothergill S. Platts-Fowler D. DLA claimants: a new assessment
DWP Research report no. 585
Berthoud 2011 Berthoud, R. ‘Trends in the employment of disabled people in Britain’ Institute for
Social and Economic Research, University of Essex
McVicar 2009 McVicar D. ‘Local level incapacity benefit rolls in Britain: correlates and
convergences’ Queen’s University School of Management (working paper December 2009)