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Incapacity Benefit: A Health or Labour Market Phenomenon?


  • Tessa Peasgood
  • Jenny Roberts

    () (Department of Economics, The University of Sheffield)

  • Aki Tsuchiya

    () (Department of Economics, The University of Sheffield)


The number of people claiming Incapacity Benefit has remained fairly constant in recent years at around 2.7 million (7% of the working age population), although the numbers have trebled since the 1970s when an earlier version of this benefit was available. In January 2006 the UK Government set the ambitious target of reducing the number of claimants by one million, or around 40% of the total, within the next decade. New initiatives will focus on increasing the number of people who remain in work and increasing the number leaving benefits and finding employment. This paper explores these two critical transitions using data from waves 5 to 13 of the British Household Panel Survey. We consider whether the moves onto and off benefit are driven by health status or whether labour market factors are also important. Our results show that while health, and in particular psychological health, is an important determinant of these transitions, other factors such as age, occupation and geographical location are also key explanatory factors. This suggests that a very broad range of policy measures will be required if the government is to meet its target

Suggested Citation

  • Tessa Peasgood & Jenny Roberts & Aki Tsuchiya, 2006. "Incapacity Benefit: A Health or Labour Market Phenomenon?," Working Papers 2006011, The University of Sheffield, Department of Economics, revised Nov 2006.
  • Handle: RePEc:shf:wpaper:2006011

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    References listed on IDEAS

    1. Christina Beatty & Stephen Fothergill, 2002. "Hidden Unemployment Among Men: A Case Study," Regional Studies, Taylor & Francis Journals, vol. 36(8), pages 811-823.
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    Cited by:

    1. Jennifer Roberts & Nigel Rice & Andrew M. Jones, 2008. "Early retirement and inequality in Britain and Germany: How important is health?," Working Papers 2008012, The University of Sheffield, Department of Economics, revised Nov 2008.

    More about this item


    Incapacity Benefit; Health; Psychological Health.;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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