The cost of poor health: What does rising health-related benefit spending mean for the UK and its next government?

Presentation from Resolution Foundation event

17. Economic Inactivity and Incapacity
Prof. Paul Gregg

18. Overview
●Employment and Inactivity 1970s to date
●Four Eras of Incapacity
●Key Aspects of Incapacity
●Policy
-Public Health
-Employer Contact
-Programmes
-Incentives
-Partners

19. Data (Working Age Population)
Year Employment Rate Inactivity RateIncapacity
Benefit rate
Long-term Health
Issues (millions)
Emp. Rate among
Health Issues
Early
1970s
72%
(92% M, 50% F)
25%
(App. 20%
Incapacity)
2.6%
1985 67.5 23.9% 2.8%
2000 72.0 23.7%
(27%
Incapacity)
7.2% 9.5 62.6
2019 76.2%
(80% M, 72% F)
20.5%
(25%
Incapacity)
6.0% 13.3 65.6
2022/
23
74.5% 22.3%
(30%
Incapacity)
7.8% 15.5 64.3

20. Employment and Inactivity
●2019 Pre-Pandemic Employment reached All-time high(76.2%) and
Inactivity All-time low (20.5%)
●From Full-employment era to 2019. Male employment down12ppts,
Female up 17ppts, Inactivity Down 5ppts
●Inactivity was initially Women looking after family/home replaced by
Students (+1m post-93), Incapacity (80s and 90s) and Retirement/other
(80s)
●2000-2019 numbers EI through Health fellby 400,00
●Since Pandemic Inactivity up by 900k –800k from Incapacity

21. 4 Eras for incapacity benefits
1. Full-employment Era Incapacity Benefits 2.8% of WA Pop
●1980s Recession saw huge shake out of older workers esp. with health
issues but initial move was to unemployment –Work Intensification
2. 1986 Restart and 1996 JSA saw large migration from UB to Incapacity
Benefits (up by 4.4% of WA Pop) –Intensification of Benefit Regime
3. 1999 to 2016 Steady fall (by 1.2% of WA Pop) in Incapacity Benefits –
despite rapidly ageing population
4. Pandemic Forward –IB up 800,000 (1.8% of WA Pop)

22. Key Aspects of Economic Inactivity
●Rapid rise in people reporting long-term health issues (8 million in 20
years –ageing pop., obesity/diabetes and mental health)
●Employment rate for this group rising slowly until Pandemic (stood at
65%)
●Jobs available after long-term incapacity are low paid, insecure and
unstable
●2 years out of work for health issues results in 20% lower wage on
return –scarring.
●Employment of partner of those with health issues is low

23. Key Aspects of Incapacity Benefits
●Movements in incapacity benefit numbers and driven by
onflows not off-flows (Pre-Pan 22k a month onflow with average
duration of 120 months)
●Pandemic onset saw Onflows nearly double. 22k per month
to over 40k –probably easing now
●People rarely move into work after 2 years on incapacity
benefits
●Key window for policy is 1 year before and 2 years after
benefit claim

24. Policy
1. Public Health –Address Obesity/Diabetes and mental health
epidemics: Sugar Tax and Mental Health Service
2. Employer Contact –Unpaid Sick Leave as with Maternity Leave (on
incapacity benefit but still on contract with old employer)
3. Programmes –Work adaptation, condition management, work
coaches. Add enriching work placements (FJF/Traineeships)
4. Incentives –Person to participate in placements and move into
work. Employer to offer placements/hire
5. Partners –needs more research