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Incapacity Benefit: A Health or Labour Market Phenomenon?

Peasgood, T., Roberts, J. and Tsuchiya, A. (2006) Incapacity Benefit: A Health or Labour Market Phenomenon? Working Paper. Department of Economics, University of Sheffield ISSN 1749-8368


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The number of people claiming Incapacity Benefit has remained fairly constant in recent years at around 2.7 million (7% of the working age population), although the numbers have trebled since the 1970s when an earlier version of this benefit was available. In January 2006 the UK Government set the ambitious target of reducing the number of claimants by one million, or around 40% of the total, within the next decade. New initiatives will focus on increasing the number of people who remain in work and increasing the number leaving benefits and finding employment. This paper explores these two critical transitions using data from waves 5 to 13 of the British Household Panel Survey. We consider whether the moves onto and off benefit are driven by health status or whether labour market factors are also important. Our results show that while health, and in particular psychological health, is an important determinant of these transitions, other factors such as age, occupation and geographical location are also key explanatory factors. This suggests that a very broad range of policy measures will be required if the government is to meet its target.

Item Type: Monograph (Working Paper)
Copyright, Publisher and Additional Information: The Sheffield Economics Research Paper (SERP) series offers a forum for the research output of the academic staff and research students of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by a departmental editor. However, the contents and opinions expressed remain the responsibility of the authors. All papers may be downloaded free on the understanding that the contents are preliminary and therefore permission from the author(s) should be sought before they are referenced.
Institution: The University of Sheffield
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) > Sheffield Economics Research Papers Series
Depositing User: Repository Officer
Date Deposited: 20 Oct 2009 15:03
Last Modified: 07 Jun 2014 22:00
Published Version: http://www.shef.ac.uk/economics/research/serps/yea...
Status: Published
Publisher: Department of Economics, University of Sheffield
Identification Number: Sheffield Economic Research Paper Series 2006011
URI: http://eprints.whiterose.ac.uk/id/eprint/9951

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