Employment policies and data

OECD says governments must continue reforms of disability systems


20/11/2008 - OECD governments should continue reforming their sickness and disability systems and help people with health problems to retain their jobs or find new ones, according to a new OECD report.

Sickness, Disability and Work: Breaking the Barriers (Vol.3) – Denmark, Finland, Ireland and the Netherlands notes that across OECD countries governments are spending twice as much on illness and disability as on unemployment benefit: as much as 3% of GDP in Denmark and Finland and over 4% in the Netherlands, compared to an OECD average of 2% and 1.5% in Ireland.

Helping people with health problems stay in or return to work would increase overall employment rates and reduce public spending, the report notes, and it would raise the incomes of those people who can and often want to work.

In the current economic downturn, there is a risk that some countries may be tempted to use sickness and disability schemes to cushion job losses. This would be a big, costly long-term mistake given that the vast majority of people who are put on disability benefits never work again.

Denmark and the Netherlands have seen rapid increases in the number of young people claiming disability benefits, while Ireland is facing a rapid increase in the use of long-term sickness and disability schemes, especially for people over 50. Similarly, in Finland disability benefits are being mainly used as a substitute for early retirement, with 70% of all new recipients being older than 50.

In all four countries, new claimants increasingly suffer from mental-health conditions. Finland reports very high rates of unemployment for people with disability, while Ireland has very low and falling employment rates for this group. The latter is also true for the Netherlands, despite the recent success of far-reaching reform in reducing the flow into disability benefits. In Denmark, despite a series of benefit reforms, dependence on health-related benefits has increased.

What should countries do? Improving the financial incentives for public authorities, such as benefit offices, to be more pro-active in helping people off benefit and back to work would help. Making employers responsible for paying more towards a worker’s sickness or disability benefit, for example, would also encourage firms to try to retain workers.

Denmark and the Netherlands have also streamlined the roles and responsibilities of their main public agencies to create a one-stop-shop service for people on sickness or disability benefit. This has made the benefit and employment support system simpler and more transparent and improved co-operation and co-ordination. Finland and Ireland should follow their lead.

Targeting supports more effectively is vital, such as making sure that caseworkers have the time to deal with every client on an individual basis. Getting the balance right between size and degree of targeting is also important. The highly focused wage subsidy scheme in Finland is effective but only in helping a few people, whereas Denmark’s heavily and permanently subsidised flex-job scheme  employs 5% of the labour force but is expensive and could be improved.

See the country notes on DenmarkFinlandIreland and the Netherlands for details about the OECD's policy recommendations. This is the 3rd volume in the Sickness, Disability and Work: Breaking the Barriers series. Volume 1 released in 2006 covered Norway, Poland and Switzerland; Volume 2 released in 2007 covered Australia, Luxembourg, Spain and the United Kingdom.

For more information on OECD work on sickness and disability systems, please see

Journalists can obtain a copy of Sickness, Disability and Work: Breaking the Barriers (Vol. 3) – Denmark, Ireland, Finland and the Netherlands by contacting Spencer Wilson, OECD Media Relations Division (tel. +331 45 24 81 18).

For further information, please contact one of the authors in OECD’s Directorate of Employment, Labour and Social Affairs: Christopher Prinz (tel. +331 4524 9483), Michael Förster (tel. +331 4524 9280) and Ana Llena Nozal  (tel. +331 4524 8527).


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