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Can Helping the Sick Hurt the Able? Incentives, Information and Disruption in a Welfare Reform

Author

Listed:
  • Felix Koenig
  • Barbara Petrongolo
  • John Van Reenen
  • Nitika Bagaria

Abstract

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 diasability 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.

Suggested Citation

  • Felix Koenig & Barbara Petrongolo & John Van Reenen & Nitika Bagaria, 2019. "Can Helping the Sick Hurt the Able? Incentives, Information and Disruption in a Welfare Reform," The Economic Journal, Royal Economic Society, vol. 129(624), pages 3189-3218.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:624:p:3189-3218.
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    File URL: http://hdl.handle.net/10.1093/ej/uez033
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    Cited by:

    1. Andreas Teichgraber & John Van Reenen, 2021. "Have Productivity and Pay Decoupled in the UK?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 41, pages 31-60, Fall.
    2. Gruber, Jonathan & Lordan, Grace & Pilling, Stephen & Propper, Carol & Saunders, Rob, 2022. "The impact of mental health support for the chronically ill on hospital utilisation: Evidence from the UK," Social Science & Medicine, Elsevier, vol. 294(C).
    3. Judit Krekó & Álmos Telegdy, 2025. "The effects of a disability employment quota when compliance is cheaper than defiance," Economica, London School of Economics and Political Science, vol. 92(366), pages 614-643, April.
    4. Julian Jäger & Elisabeth Sattler-Bublitz & Miriam Beblo, 2025. "Disabling misperceptions? How employees (D)evaluate the labor force participation of people with disabilities," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 59(1), pages 1-15, December.
    5. Mike Brewer & Thang Dang & Emma Tominey, 2023. "Welfare reform: Employment, mental health and intrahousehold insurance," CEPEO Working Paper Series 23-06, UCL Centre for Education Policy and Equalising Opportunities.

    More about this item

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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