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Incapacity Benefit Reform: tackling the rise in labour market inactivity

A new policy analysis is published today (Wednesday 15 March) by the Centre for Economic Performance| (CEP) at LSE. Incapacity Benefit Reform: tackling the rise in labour market inactivity is by Dr Giulia Faggio|, a research officer at the centre.

Dr Faggio's analysis finds:

  • There are 2.7 million people of working age in the UK who are claiming Incapacity Benefit, Severe Disability Allowance or Income Support on the grounds of incapacity. Total spending on on benefits for disabled people was in excess of £19 billion in 2004.
  • The inactivity rate for men - the proportion of the working age population of men over 25 who are neither in work nor looking for a job - has risen by a multiple of around four since the mid-1970s. Among prime-age men (those aged between 25 and 54), the inactivity rate is five times higher than it was in the mid-1970s.
  • The level of inactivity among prime-age men is particularly concentrated among those who are both low skilled and suffering from a chronic health problem or disability.
  • The inactivity rate for prime-age men in the UK is higher than the European (EU15) average. At the same time, labour market participation of older (55-64) men is higher in the UK than in continental Europe.
  • There are considerable regional differences: Northern England, Wales and Scotland have higher inactivity rates than the Midlands and Southern England, and the differences are wider today than they were in the mid-1970s.
  • The government's strategy to reverse the rise in inactivity and Incapacity Benefit claims includes: the New Deal for Disabled People (NDDP); the Parthways-to-Work pilots; and the recently published Green Paper on welfare reform.
  • Evidence on the NDDP pilots indicate that take-up of the service has been relatively low and participation has produced modest results. By contrast, evidence on the Pathways-to-Work pilots shows that the programme has been successful in increasing the rate at which new disability claimants return to work.
  • The Green Paper applies and extends the successful strategy of the Pathways-to-Work programme nationwide. But the inability to deal with existing claimants reduces the potential impact of the proposed reforms.

Click here to download a copy of Incapacity Benefit Reform: tackling the rise in labour market inactivity| (PDF)

Ends

Contact: Romesh Vaitilingam on 07768 661095 or email romesh@compuserve.com|

15 March 2006

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