Panel Paper: The Labor Market Impacts of Stricter Disability Insurance Eligibility: Evidence from the UK Work Capability Assessment

Saturday, November 10, 2018
8206 - Lobby Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Dillan Bono-Lunn, University of North Carolina, Chapel Hill

In the United Kingdom (UK) and elsewhere, there has been increased concern about disability insurance receipt by individuals who are able to work. The Work Capability Assessment (WCA) was initially enacted by the Department for Work and Pensions (DWP) in 2008, assessing new claims to Employment and Support Allowance (ESA). Due in part to the Great Recession, however, claims increased following its introduction. Amid broader discussions of austerity and welfare reform in Britain, eligibility requirements were tightened, and between 2011 and 2016, Incapacity Benefit (IB) and Income Support recipients were reassessed using the amended WCA and put in one of the following groups: fit for work; unfit for work but fit for "work-related activity;" or fit for neither. The WCA has received widespread criticism for its failure to consider barriers to employment, particularly barriers due to intellectual or psycho-emotional disabilities; many disabled people were likely incorrectly assessed as fit for work/work-related activity, with nearly 50% of appealed decisions overturned. The revised WCA and the consequential reassessments of thousands of claimants present an opportunity for a natural experiment. Do claimants respond to more stringent eligibility requirements by returning to the labor force? Are would-be claimants successful in finding employment? How are the incomes of claimants affected by uncertain benefit levels or new benefit requirements? Using a fixed effect design and Understanding British Society panel data, this paper exploits variation in disability reassessment rates across government office regions to analyze the labor market impacts of revisions to the Work Capability Assessment (WCA) initiated under the Coalition government.