Association for Public Policy Analysis & Management

The importance of sickness and disability payments as policy issues has increasingly been recognised in recent decades.  The OCED has emphasised the extent to which the barriers to people with health problems and/or disability participating fully in the labour market represents a ‘social and economic tragedy’. At the same time, the economic costs of such non-participation and the rising financial costs of sickness and disability benefits has led to an increasing focus on policies for improving work retention and return.  This paper, drawing on recent research for Ireland’s National Disability Authority, critically analyses policies for adult sickness and disability payments in six OECD countries: Australia, Finland, France, the Netherlands, Sweden and the UK. The paper reviews reforms of incapacity to work policies in each of the countries, which have ranged from paradigmatic in the Netherlands to minor in Finland and France. The paper shows that in terms of the structure of the current system and the rationale for reforms, the Netherlands system is the most coherent. These reforms include enhancing employer incentives to avoid sickness, increased gatekeeping and tightening eligibility criteria. Critical has been the intensified role of employers in preventing long-term sickness, absence, and subsequent disability, with a strong emphasis on early interventions. Sweden has also introduced a number of successful reforms, including guidelines for GPs, strengthening reassessment of sickness claims and tightening conditions for access to benefits. In France and Finland, reforms have been more limited but have included strengthening reassessment of sickness claims, guidelines for certifiers (in France) and the introduction of part-time benefits (in Finland). Australia and the UK have adopted a different approach. Reforms here have focused on making it more difficult to qualify for long-term benefits and encouraging claimants to ‘return’ to work. However, in both countries only about half of those going onto long-term benefits have come from employment. Although the UK was an early reformer in terms of privatisation of sick pay, the focus on the role of the private sector appears to have stopped and, until recently, there appears to have been little emphasis on the importance of keeping people in work and ensuring early return to work. This has begun to change with the introduction of the Fit Note and the reforms proposed by the independent review of sickness absence, ‘Health at Work’. However, this has as yet had a limited impact and it is difficult to predict whether it will have a long-term impact on sickness absence in the UK.  The paper concludes that if the ‘social and economic tragedy’ is to be avoided, then governments may need to introduce a package of measures that includes incentivising employers to manage employees’ sickness early on, and not rely on reforming medical assessment systems to reduce benefit claims which is a crude and may ultimately be an unsuccessful and potentially harmful policy response.