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Sickness and Disability Benefits: Jobs crisis makes need for reform more urgent, says OECD

Wed, 11/24/2010 - 3:23am
OECD

Governments should urgently reform their sickness and disability benefit systems to help people get back to work and reduce the burden on public finances, according to a new OECD report.

Sickness, Disability and Work: Breaking the Barriers says that the economic downturn will likely lead to a rise in the number of people on disability benefit, up from the current 6% of the working-age population.

“Countries need to speed up their reforms to help people with disability find a job,” OECD Secretary-General Angel Gurría said. “The mantra of making work pay must become central to all welfare schemes.”

Disability benefits represent 10% of public social spending in most OECD countries. This is equal to 2% of GDP and twice the cost of unemployment benefits before the crisis. Once people move onto disability benefit, they almost never leave it for a job, the report says.

Before the crisis in 2007, more people of working age in OECD countries received disability benefits than unemployment benefits (30.2 million compared with 27.9 million). Mental health issues are becoming the main cause of people claiming disability benefit, says the report. One-third of all new disability benefit claims over the past 15 years have been due to a mental health condition, rising to 70% among people aged 20-34.

The social cost is high: while most people with disability who are not working receive some public benefits, they are much more likely to live in poverty. In Australia, Canada, Ireland, Korea and the US, one in three people with disability are poor.

The best way to help people with health problems or disability avoid poverty, according to the OECD, is to strengthen the financial incentives to work: reforming the tax and benefit system so that they can do paid work and still receive some benefits is key, says the OECD.

Other measures must include:

• Reform benefit system obligations for employers. They should, for example, share the cost of paying sickness benefit for workers. Firms that hire people with health problems or disability should receive wage subsidies, as happens in Nordic countries.

• Harmonise the unemployment and sickness and disability benefit systems. This would save costs, stop the frequent transfer of people between benefits and prevent people with disability or health problems being treated differently from the rest of the population.

• Convince doctors of the importance of helping sick workers return to work quickly. In Sweden, providing doctors with guidelines on average duration of sick leaves for frequent illnesses helped cut the time people spent off work.

For further information, journalists are invited to contact Christopher Prinz (christopher.prinz@oecd.org) or the OECD’s Media relations division (tel: 33 1 45 24 97 00 or email news.contact@oecd.org).

More information is available at www.oecd.org/els/disability. On that page country notes are also available for AustraliaCanadaDenmarkFinlandIrelandNetherlandsNew ZealandNorwaySwedenSwitzerlandUK and US.

>> Read the opening remarks by Deputy Secretary-General, Aart De Geus

>> Read the background note on the Sickness and Disability project

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