Can helping the sick hurt the able? Incentives, information and disruption in a welfare reform
Nitika Bagaria, Felix Koenig, Barbara Petrongolo and John Van Reenen
The UK Jobcentre Plus reform sharpened bureaucratic incentives to help disability benefit recipients (relative to unemployment insurance recipients) into jobs. In the long run, the policy raised exits off disability benefits by 10% and left unemployment outflows roughly unchanged, consistent with (i) beneficial effects of reorganising welfare offices for both groups, and (ii) a shift in bureaucrats' efforts towards getting disability benefit recipients into jobs relative to those on unemployment benefit. The policy accounted for about 30% of the decline in the aggregate disability rolls between 2003 and 2008. In the short run, however, we detect a reduction in unemployment exits and no effect on disability exits, suggesting important initial disruption effects from the big reorganisation. This highlights the difficulty of welfare reform as policymakers may focus on the short-run political costs rather than the long-run economic benefits.
1 November 2019
Economic Journal 129(624) , pp.3189-3218, 2019
https://academic.oup.com/ej/article/129/624/3189/5525083
This Journal article is published under the centre's Growth programme, Labour programme.
This publication comes under the following theme: Labour market inequalities: Causes and cures