To what extent have relaxed eligibility requirements and increased generosity of disability benefits acted as disincentives for employment? A systematic review of evidence from countries with well-developed welfare systems.

BACKGROUND: Reductions in the eligibility requirements and generosity of disability benefits have been introduced in several Organisation for Economic Cooperation and Development (OECD) countries in recent years, on the assumption that this will increase work incentives for people with chronic illness and disabilities. This paper systematically reviews the evidence for this assumption in the context of well-developed welfare systems.
METHOD: Systematic review of all empirical studies from five OECD countries from 1970 to December 2009 investigating the effect of changes in eligibility requirements or level of disability benefits on employment of disabled people.
RESULTS: Sixteen studies were identified. Only one of five studies found that relaxed eligibility was significantly associated with a decline in employment. The most robust study found no significant effect. On generosity, eight out of 11 studies reported that benefit levels had a significant negative association with employment. The most robust study demonstrated a small but significant negative association.
CONCLUSION: There was no firm evidence that changes in benefit eligibility requirements affected employment. While there was some evidence indicating that benefit level was negatively associated with employment, there was insufficient evidence of a high enough quality to determine the extent of that effect. Policy makers and researchers need to address the lack of a robust empirical basis for assessing the employment impact of these welfare reforms as well as potentially wider poverty impacts.