Sickness, Disability and Work breaking the barrierS Sickness, Disability Too many workers leave the labour market permanently due to health problems or disability, and too few people with reduced work capacity manage to remain in employment. This is a social and and Work economic tragedy common to virtually all OECD countries. It also raises an apparent paradox that needs explaining: Why is it that the average health status is improving, yet large numbers of people of working age are leaving the workforce to rely on long-term sickness and disability benefits? breaking the barrierS This report, the last in the OECD series Sickness, Disability and Work: Breaking the Barriers, synthesises the project’s findings and explores the possible factors behind the paradox described above. It highlights the roles of institutions and policies and concludes that higher expectations and better incentives for the main actors – workers, employers, doctors, public agencies and service providers – are crucial. Based on a review of good and bad practices across OECD countries, this report suggests a series of major reforms is needed to promote employment of people with health problems. The report examines a number of critical policy choices between, for example: tightening inflows and raising outflows from disability benefit; and promoting job retention and new hiring of people with health problems. It questions the need for distinguishing unemployment and disability as two distinct contingencies, emphasises the need for a better evidence base, and underlines the challenges for policy implementation. In the same series S Vol. 1: Norway, Poland and Switzerland (2006) ic k n Vol. 2: Australia, Luxembourg, Spain and the United Kingdom (2007) es s Vol. 3: Denmark, Finland, Ireland and the Netherlands (2008) , D is Sweden: Will the Recent Reforms Make it? (2009) a b Canada: Opportunities for Collaboration (2010) ilit y a n d www.oecd.org/els/disability W o r k b © The painting on the front cover comes from “Ateliers Personimages”, a French non-profit association promoting artistic r e creation for disabled people (www.personimages.org) a k in g t h The full text of this book is available on line via these links: e www.sourceoecd.org/employment/9789264088849 ba r www.sourceoecd.org/socialissues/9789264088849 r ie Those with access to all OECD books on line should use this link: r S www.sourceoecd.org/9789264088849 SourceOeCD is the OECD online library of books, periodicals and statistical databases. For more information about this award-winning service and free trials ask your librarian, or write to us at [email protected]. A SYNTHESIS OF FINDINGS ACROSS OECD COUNTRIES iSbn 978-92-64-08884-9 -:HSTCQE=U]]]Y^: 81 2010 15 1 P www.oecd.org/publishing Sickness, Disability and Work: Breaking the Barriers A SYNTHESIS OF FINDINGS ACROSS OECD COUNTRIES ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Commission takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. ISBN 978-92-64-08884-9 (print) ISBN 978-92-64-08885-6 (PDF) Also available in French: Maladie, invalidité et travail : Surmonter les obstacles – Synthèse des résultats dans les pays de l'OCDE Photo credits: Cover © Myriam MICHAU/Personimages. Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2010 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. FOREWORD Foreword S ickness and disability policies are rapidly moving to centre stage in the economic policy agenda of many OECD countries. Even before the onset of the recent recession too many people of working age who were able to work relied on sickness and disability benefits as their main source of income, and the employment rate of those reporting disabling conditions was low. The economic crisis has added to this pressure by raising the possibility that many of the long-term unemployed may end up on sickness and disability benefits, similar to what happened in previous downturns. In this context, there is an urgent need to address this “medicalisation” of labour market problems by tackling the widespread use of disability benefits across the OECD and promoting labour market participation of people with disability. Many people with health problems can work and indeed want to work in ways compatible with their health condition, so any policy based on the assumption that they cannot work is fundamentally flawed. Helping people to work is potentially a “win-win” policy: It helps people avoid exclusion and have higher incomes while raising the prospect of more effective labour supply and higher economic output in the long term. This report summarises the thematic review on Sickness, Disability and Work undertaken by the OECD over the past few years. It analyses key labour market outcomes of people with disability across the OECD and draws policy lessons from the thirteen reviewed countries (Australia, Canada, Denmark, Finland, Ireland, Luxembourg, the Netherlands, Norway, Poland, Spain, Sweden, Switzerland and the United Kingdom) in transforming their sickness and disability schemes to active support systems that promote work. The report consists of six chapters and an Executive Summary with the main conclusions and policy recommendations. Chapter1reviews the main trends and the short and long-term economic context in which disability policy operates. Chapter2sets the scale of the problems by laying out the main social and economic outcomes for people with disability and society at large across the OECD. Chapter3looks at the direction and extent of recent sickness and disability policy reforms, the degree of policy convergence across countries, and the impact of policies on the disability beneficiary rate. The three subsequent chapters discuss key policy areas in need of change: The disability benefit system, which is too passive in most cases, and the work incentives it provides (Chapter4); the involvement and financial incentives of employers, especially in the critical sickness absence phase (Chapter5); and the responsibilities for public authorities and service providers in helping people access timely employment supports (Chapter6). The report also provides an update, further development and deepening of the findings of the2003 OECD report on disability policy for the working-age population, Transforming Disability into Ability, many of whose conclusions are still valid. As this new report shows, in many countries disability policy has advanced considerably during the past decade. However, changes in outcomes have not kept pace with changes in policy development. Disability appears to be a moving target for policy makers, requiring i)more rigorous implementation of rules and r ecent changes and ii)additional and more comprehensive reform. Moreover, things have become even more complicated in recent years because of the growing weight of a wide range of mental health problems in the inflows to sickness and disability systems. The latter phenomenon is not yet well understood and the SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010 3 FOREWORD OECD has just launched a new country review exercise to analyse it and evaluate which policies might help to counteract it. Work on the Sickness, Disability and Work review was a collaborative effort, carried out jointly by the Employment Analysis and Policy Division and the Social Policy Division of the OECD. The report was prepared by ChristopherPrinz (team leader), Shruti Singh, Heonjoo Kim and Ana Llena-Nozal, with contributions from Allen Gomes and Veerle Slootmaekers. Tax/benefit models were provided by Dominique Paturot, statistical work by Dana Blumin and MaximeLadaique, and administrative support by Sophie O’Gorman. John Martin, Monika Queisser and Stefano Scarpetta provided valuable comments. The report also includes comments received from the reviewed countries and is otherwise based on the comparative review reports published during2006-10and additional information provided by member countries. 4 SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010 TABLE OF CONTENTS Table of Contents Executive Summary and Policy Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Chapter 1. The Economic Context forDisability Policy. . . . . . . . . . . . . . . . . . . . . . . . . 21 1.1. The importance of workers with disability to the economy and society. . . . . 23 1.2. Workers with disability face greater barriers in the labour market . . . . . . . . . 27 1.3. Trends in disability benefit rates, the business cycle and population ageing. 34 1.4. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Annex 1.A1. Defining and Measuring Disability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Annex 1.A2. Additional Supporting Evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Chapter 2. Key Trends and Outcomes in Sickness and Disability . . . . . . . . . . . . . . . . . . 49 2.1. Insufficient labour market integration of people with disability. . . . . . . . . . . . 50 2.2. Poor financial resources of people with disability. . . . . . . . . . . . . . . . . . . . . . . . 53 2.3. High costs of sickness and disability benefit schemes . . . . . . . . . . . . . . . . . . . . 57 2.4. Benefit system dynamics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 2.5. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Annex 2.A1. Additional Supporting Evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Chapter 3. The Direction of Recent Disability Policy Reforms . . . . . . . . . . . . . . . . . . . . . . 77 3.1. Key reform trends across the OECD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 3.2. Policies converge despite continuing differences . . . . . . . . . . . . . . . . . . . . . . . . 84 3.3. The effect of policy changes on disability benefit rolls. . . . . . . . . . . . . . . . . . . . 91 3.4. The political economy of reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 3.5. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Annex 3.A1. OECD Disability Policy Typology: ClassificationoftheIndicator Scores. . . 99 Annex 3.A2. OECD Disability Policy Typology: Country Scores Around2007. . . . . . . 101 Chapter 4. Transforming Disability Benefits into an Employment Instrument . . . . . . . 103 4.1. From disability assessment to work-capacity assessment. . . . . . . . . . . . . . . . . 104 4.2. Moving to an activation stance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 4.3. Making work pay: reforming tax and benefit system . . . . . . . . . . . . . . . . . . . . . 117 4.4. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010 5 TABLE OF CONTENTS Chapter 5. Activating Employers and Medical Professionals. . . . . . . . . . . . . . . . . . . . . . . 125 5.1. Strengthen incentives for employers to keep workers with health problems. . . 126 5.2. Supporting measures to ensure employers can fulfil their responsibilities . . 134 5.3. Stronger employment focus by medical professionals. . . . . . . . . . . . . . . . . . . . 139 5.4. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Chapter 6. Getting the Right Services to the Right People at the Right Time . . . . . . . . . 145 6.1. Improving cross-agency co-ordination and co-operation . . . . . . . . . . . . . . . . . 147 6.2. Engaging with clients systematically and in a tailored way. . . . . . . . . . . . . . . . 153 6.3. Addressing incentives for private service providers. . . . . . . . . . . . . . . . . . . . . . 161 6.4. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Tables 1.1. Work-related stress increases with higher work intensity and lower work satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 1.2. The impact of the business cycle on employment of people with disability is small compared with the effect of disability itself. . . . . . . . . . . . . . . . . . . . . . . 31 2.1. Incapacity-related spending is much higher than unemployment-related spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 2.2. Probability of receiving a disability benefit after a sickness absence spell varies with personal characteristics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.1. Three distinct disability policy models across the OECD . . . . . . . . . . . . . . . . . . . 88 3.2. What explains changes in disability benefit recipiency rates? . . . . . . . . . . . . . . 92 3.A1.1. OECD disability policy typology: classification of the indicator scores. . . . . . . . 99 3.A2.1. OECD disability policy typology: country scores around2007 . . . . . . . . . . . . . . . 101 4.1. Partial disability benefit regulations vary considerably across OECD countries . . . 109 4.2. More and more countries are providing disability benefits foratemporary period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 5.1. Obligations for the employer are generally weak in regard to vocational rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 5.2. Pathways into disability benefit are manifold but sickness is a major precursor everywhere. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 6.1. Eligibility criteria for employment supports are very restrictive . . . . . . . . . . . . . . . . 155 Figures 1.1. Disability prevalence at working age is high in most OECD countries . . . . . . . . . . . 22 1.2. Social and economic integration of persons with disability islaggingbehind . . . . 23 1.3. Higher participation rates for people with disability can help prevent future labourforce declines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 1.4. People with disability have significantly lower levels of education. . . . . . . . . . . . . . 27 1.5. The education gap between people with and without disability hasincreased over cohorts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 1.6. Trends in labour market and working condition indicators areinconclusive. . . . . 29 6 SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010 TABLE OF CONTENTS 1.7. Following the peak of a recession, disability benefit recipiency rates tend to increase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1.8. The economic cycle is only one and often not the main factor explaining fluctuations in the disability beneficiary rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 1.9. Disability prevalence increases sharply with age which is critical inview of population ageing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 1.10. Demography explains only some of the change in disability beneficiary trends . . 38 1.A2.1. Leaving employment leads to higher mental distress… . . . . . . . . . . . . . . . . . . . . . . . 46 1.A2.2. …while finding a job results in improved mental health . . . . . . . . . . . . . . . . . . . . . . 47 2.1. Employment rates of people with disability are low and have been falling in many countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 2.2. Employment rates of people with mental health conditions areparticularly low. . 52 2.3. When employed, people with disability work part-time more often than others . 52 2.4. People with disability are twice as likely to be unemployed, eveningood times. . 53 2.5. Incomes of people with disability are relatively low, unless they are highly educated and have a job . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 2.6. People with disability are at greater risk of living in or near poverty . . . . . . . . . . . . 56 2.7. Many non-employed persons with disability are not eligible for or do not receive public benefits in Mediterranean countries and North America . . . . . . 57 2.8. Limited disability-related resources go to employment and rehabilitation programmes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 2.9. Disability benefit recipiency rates are high and still increasing inmany countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 2.10. Disability benefit rolls have evolved differently across the OECD, reflecting policy choices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 2.11. More and more inflows into disability benefit because of mental health conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 2.12. Sickness absence rates are correlated with disability beneficiary rates . . . . . . . . . . 63 2.13. Previous sickness benefit spells increase the probability of a disability benefit claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 2.14. Declines in sickness absence usually precede a decline in disability benefit claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.15. Some countries have recently managed to reduce inflows into disability benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.16. People almost never leave a longer-term disability benefit foremployment . . . . . 67 2.A1.1. Falling trend in spending on disability benefits in the late1990s buta slight rise lately . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07 2.A1.2. Levels and trends in disability benefit recipiency rates are dominated by 50-64year-olds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 2.A1.3. In some countries, women are now receiving disability benefits more often than men . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 2.A1.4. There are large variations in the age pattern of disability benefit inflows acrosscountries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 3.1. Large variation in disability policy orientation across the OECD . . . . . . . . . . . . . . . . 86 3.2. Disability policy is changing fast in many OECD countries . . . . . . . . . . . . . . . . . . . 87 3.3. Disability policy is converging in the same direction . . . . . . . . . . . . . . . . . . . . . . 90 SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010 7 TABLE OF CONTENTS 4.1. In many OECD countries, more than one in two applicants foradisability benefit are rejected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 4.2. Net replacement rates are often high, especially for previous low-wage earners . 119 4.3. Disability benefits are above social assistance but comparable with unemployment benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 4.4. Taking up work does not always pay, but country differences are large . . . . . . 122 8 SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS © OECD 2010
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