Panel Paper: Disability Growth and Disability Reforms: Lessons from OECD Nations

Thursday, November 7, 2013 : 10:25 AM
3017 Monroe (Washington Marriott)

*Names in bold indicate Presenter

Richard Burkhauser, Cornell University, Mary C. Daly, Federal Reserve Bank of San Francisco, Duncan McVicar, Queen's University Management School and Richard Wilkins, The University of Melbourne
Over the last decade and a half, unsustainable growth in program costs and beneficiaries, together with a growing recognition that even people with severe impairments can work, prompted fundamental disability policy reforms first in the Netherlands and more recently in Sweden, the United Kingdom and other EU nations.  These reforms primarily focused on slowing entry onto long-term disability cash transfers by keeping newly impaired workers in the labor market.  Although there were some efforts to reduce the number of current beneficiaries through disability reassessments or work incentives, these were both less important and less successful.  

In this paper we consider what lessons U.S. policymakers can learn from European disability policy reforms.  We begin the paper with a description of the crisis in the U.S. disability system and what the research says are its causes.  We then turn to reforms in European countries and what lessons they offer to U.S. policymakers.  We conclude with a summary of the success of these reforms in terms of costs, caseloads, and the economic well-being of people with disabilities.


Lesson 1.  Disability Does not Mean Incapacity

European disability reforms explicitly recognize that all individuals have the right to participate in the economy and broader society and also have the responsibility to participate.  This recognition translated into policy reforms focused on defining and increasing capacity rather than incapacity.  A key finding from the reforms is that a substantial share of people who were moving onto the long-term cash transfer disability programs were, with reasonable levels of support, able to find or maintain employment.  

Lesson 2.  Program Incentives Affect Behavior

European reforms also explicitly recognized that program incentives, embedded in policy design, affect behavior and thus outcomes.  This acknowledgement focused policymakers on creating programs with incentives that promoted desired outcomes including continued employment.  Reforms in the Netherlands and Sweden provide particularly salient examples of how changing program incentives changes individual, employer, and program administrators behavior.  In both cases, changes in program incentives greatly reduced the number of newly impaired individuals moving out of work and onto to permanent cash benefits. 

Lesson 3.  Early Intervention Reduces Flows—Stocks Are Harder

European reforms also highlight where change is most difficult.  While reforms in most nations have been quite successful at reducing the flow of new beneficiaries onto the program, they have been far less successful at reducing the stock of disabled beneficiaries already on the program. Even when strict time limits are put in place, movement off the disability system for longer-duration beneficiaries is difficult.  

Evaluating Success

Fundamental disability reforms in Europe focused on work over benefits appear to have successfully lowered projected long-term costs for taxpayers, made the job of disability administrators less difficult, and improved the short- and long-run opportunities of people with disabilities.