OECD, Directorate for Employment, Labour and Social Affairs OECD/UMD Conference Labour activation in times of high unemployment Paris, 14-15 November 2011.
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OECD, Directorate for Employment, Labour and Social Affairs
OECD/UMD ConferenceLabour activation in times of high unemploymentParis, 14-15 November 2011
CRISIS, UNEMPLOYMENT ANDDISABILITY BENEFIT CLAIMS:
Does structural reform matter?
Christopher Prinz
Employment Analysis and Policy Division
www.oecd.org/els/disability
OUTLINE OF THE PRESENTATION
• Unemployment and disability
• Post-crisis disability beneficiary trends
• Long-term disability beneficiary trends
• Programmes and policies that seem to work
• New challenges and conclusions
UNEMPLOYMENT AND DISABILITYDisability is often higher than unemployment
Source: OECD (data refer to the year 2008).
UNEMPLOYMENT AND DISABILITYSome thoughts on their relationship
• People with disability are likely to be laid-off first in the wake of downsizing or an economic downturn
• Long-term unemployment is likely to worsen health and can lead to disability
• Once on disability benefit, people never return back to the labour market (contrary to unemployment)
• Disability as hidden unemployment and, vice versa, unemployment as hidden disability
Unemployment and disability benefit recipiency rates in four countries, 1970-2010
Source: updated from OECD (2010), Sickness, Disability and Work: Breaking the Barriers, OECD Publishing, Paris.
POST-CRISIS TRENDSCausal links as well as substitution effects
Australia United States
SwedenNetherlands
0
2
4
6
8
10
12
0
1
2
3
4
5
6
7
1970 1975 1980 1985 1990 1995 2000 2005 2010
0
1
2
3
4
5
6
7
8
9
0
2
4
6
8
10
12
1970 1975 1980 1985 1990 1995 2000 2005 20100
2
4
6
8
10
12
0
2
4
6
8
10
12
1970 1975 1980 1985 1990 1995 2000 2005 2010
0
2
4
6
8
10
12
0
1
2
3
4
5
6
7
1970 1975 1980 1985 1990 1995 2000 2005 2010
Disability recipiency rate(% of the working-age population (aged 20-64)
Long-term unemployment rate(% of total labour force)
Harmonised unemployment rate(% of total labour force)Right-side scale
POST-CRISIS TRENDSStructural reforms seem to make a difference …
Annual average growth of disability benefit caseloads, before and after 2007
Source: OECD (2011), Employment Outlook, OECD Publishing, Paris.
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
2000-07 2007-10
POST-CRISIS TRENDS… but data availability limits the conclusions
Average annual growth in the number of new disability benefit claims, before and after 2007
Source: OECD.
-40
-30
-20
-10
0
10
20
30
HU
N
SWE
NZL
PRT
MEX
CHE
DEU CZ
E
NLD ES
T
AU
T
NO
R
FIN
JPN
USA
GBR AU
S
DN
K
SVN
BEL
CAN
ISR
POL
SVK
2000-2007 2007-2009
POST-CRISIS TRENDSPreliminary conclusions
• Several countries have seen increases in disability beneficiary rates in the aftermath of the great recession
• This is in line with findings from previous downturns
• Time lag from unemployment to disability implies that it is too early to conclude on the impact of the crisis
• Moreover, easier/longer access to unemployment benefit in this crisis has reduced the pressure on disability
• Countries that have embarked on structural reform prior to the crisis have often seen a continuation in the trend decline
• The resilience of structural disability reform is promising
LONG-TERM TRENDSDisability beneficiary rates are rising fast
Disability benefit recipients in per cent of the population aged 20-64in 15 OECD countries, early 1980s and 2008
Source: OECD (2010), Sickness, Disability and Work: Breaking the Barriers, OECD Publishing, Paris.
0
2
4
6
8
10
12
1980 2007 (↘)
LONG-TERM TRENDSCan non-policy factors explain the trend?
• Demography?
• Explains only some of the trend
• Health?
• Objective measures have improved
• Labour markets?
• Temporary employment
• Industry structures
• Working conditions
LONG-TERM TRENDSConclusion on policy factors
• Disability benefit has become the main working-age benefit in many OECD countries (benefit of last resort)
• Driven by policy
• Reform of unemployment benefit and social assistance schemes (activation agenda)
• Reform of pension schemes (phasing-out of early retirement)
• Absence of equally comprehensive disability reform
Outcomes are the result of a wrong policy choice
Urgent need to consider structural disability reform
EFFECTIVE POLICIES(1) Improved financial incentives
• Strengthening financial incentives for employers
• e.g. experience-rated premiums for sickness, work injury and disability benefits; flexible hiring incentives
• Making work pay for individuals
• e.g. compensation for earnings loss or wage supplement; better phase-out of benefits; benefit suspension rules
• Addressing incentives for authorities and providers
• e.g. outcome-focus to improve quality and efficiency; performance targets, benchmarking, direct incentives
EFFECTIVE POLICIES(2) Stronger responsibilities and activation
• Strengthening individual responsibilities
• e.g. cooperation requirements, training obligation, regular interviews; reassessment and reapplication
• Enforcing prevention and monitoring responsibilities
• e.g. absence monitoring and systematic follow-up; occupational health services; return-to-work plans
• Engaging with clients more systematically & earlier
• e.g. easy access to information and employment supports; early identification and intervention if needed
EFFECTIVE POLICIES(3) Better assessment and system structures
• Assessing capacity not incapacity
• e.g. work capacity assessment; different treatment of those with partial capacity; assess the unemployed
• Enabling employers, doctors and benefit authorities
• e.g. targeted employer supports; absence duration guidelines for doctors; special medical services
• Improving cross-agency cooperation
• e.g. reciprocal information exchange; cross-funding; bringing together or merging of institutions
EFFECTIVE POLICIESPolicy has changed remarkably in many countries …
-15
-10
-5
0
5
10
15
20
25
Integration policy change 1985-2000 Integration policy change 2000-2007
Compensation policy change 1985-2000 Compensation policy change 2000-2007
Source: OECD (2010), Sickness, Disability and Work: Breaking the Barriers, OECD Publishing, Paris.
EFFECTIVE POLICIES… but “active” spending generally remains low
Proportion of vocational rehabilitation and employment-related public spending in total incapacity-related spending, selected OECD countries, 2000-2007
Source: OECD (Sickness, Disability and Work review)
0
2
4
6
8
10
12
14
16
Around 2000 2007
• Disability benefit claims increasingly for mental disorders
• One-third of all claims; half to three-quarters among young claimants
• At the same time, most people with mental disorder have a job
• Around half of those with severe and two-thirds with a common mental disorder are employed
• Moves onto disability benefit generally through unemployment
• People with a mental disorder access a range of different working-age benefits, disability benefit being just one of them
NEW CHALLENGESMental ill-health: a new labour market policy issue
NEW CHALLENGESPeople with mental ill-health access different benefits
Source: OECD (Mental Health and Work review)
Proportion of the working-age population receiving a benefit by mental health statusand by type of benefit received, latest available year
-5
5
15
25
35
45
55
DB UB LP All DB UB SA All DB UB SA All DB UB SA All DB UB SA All
Australia Belgium Norway Sweden United States
Severe disorder Moderate disorder No disorder
• Resilience of comprehensive reform
• Structural reform makes a difference in a crisis
• Policy reorientation is needed to address underlying long-term structural issues
• The disability problem was caused, and will be solved, by policy
• Structural reform involves critical policy choices
• Need to transform sickness and disability schemes into labour market programmes
• Is the distinction between unemployment and disability useful?
• Are systems equipped to deal with mental ill-health?
CONCLUSIONS
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