In Luxembourg, disability benefits are predominantly used as a pathway to early retirement; more than 80% of all recipients are older than 50. Luxembourg has changed its approach to people with a partial reduction of their work capacity and now gives more help to people expected to enter or remain in the workforce.

The report analyses the sickness and disability policies in Australia, Luxembourg, Spain and the United Kingdom. It recommends steps governments should take to reduce the number of people claiming sickness and disability benefits and help beneficiaries back into the labour market.

Sickness, Disability and Work: Breaking the Barriers (Vol.2) notes that across OECD countries governments spend twice as much on benefits to people claiming illness and disability as they do on unemployment benefits. Most people who start claiming disability benefits will never work again, but with the right training and support, many would prefer to hold jobs and earn a salary. Their economic input is necessary to bolster government social protection and tax systems.

Government spending on sickness and disability benefits in 2005 accounted for around 2-2.5% of GDP in the four countries. In Australia, Luxembourg and the UK, that is nearly three times the spending on unemployment benefits. In addition, the employment rate of people with disabilities is about half that of other people and their unemployment rate is double.

In all four countries more people claim disability benefits when unemployment is high and continue their claims when the labour market eases. To stop this cycle, governments should reform both disability and unemployment benefit schemes at the same time. For a long period this has not been the case, which explains the continued growth in disability beneficiaries over the past decade in Australia and the United Kingdom despite very favourable economic development. Recent evidence for Luxembourg suggests that it might be politically problematical to tighten access to disability benefits because that might lead to higher structural unemployment.

Each country faces different challenges. In Australia, people often claim disability benefits when their unemployment benefits runs out. In Luxembourg, disability benefits are predominantly used as a pathway to early retirement; more than 80% of all recipients are older than 50. In Spain, decentralisation has raised significant coordination issues between the decentralised employment services and the centralised social insurance institution. The United Kingdom is dealing with a sharp increase in claims of mental and behavioural illnesses; a group which already accounts for 40% of all disability beneficiaries and with employment rates of about 20%.

What should be done? Employers, physicians and public authorities, particularly in Australia and the UK, should take more responsibility for monitoring absences due to illness – medium-term claims of illness too often turn into long-term disability claims. Luxembourg and Spain should bolster employment, rehabilitation and placement supports and the UK and Australia, where these supports are already well-developed, should improve access to them. In all four countries, further reform is needed to make sure that taking up work always pays.

The report notes that all four countries are moving in the right direction. Luxembourg and Spain are rigidly monitoring absences due to illness, Australia and the United Kingdom have significantly improved their work capacity assessments, and Australia is examining the health-related work barriers of the unemployed. Australia and Luxembourg have changed their approach to people with a partial reduction of their work capacity and now give more help to people they expect to enter or remain in the workforce. Australia and the United Kingdom have new employment and rehabilitation programmes and new funding mechanisms. All these reforms are likely to help improve outcomes, but the report shows that all four countries need to do more in order to help disabled people find jobs.