8 July 2019

Fewer Awards of Disability Pension Result in More People Receiving Temporary Benefits

Disability Pension

The reform of the early retirement pension system results in fewer awards of permanent disability benefits, but does not retain more people in the labour market. On the contrary, new research from the University of Copenhagen suggests that persons with health problems instead end up with either temporary benefits or nothing at all.

Older couple on a bench
In 2013, Denmark introduced a reform of the early retirement pension system. The reform means that today you must be more sick than before in order to be eligible for permanent disability benefits. The intention of the reform was that fewer people would end up with permanent disability benefits and that more people would remain in the labour market for a longer period of time. But new research from the Faculty of Health and Medical Sciences at the University of Copenhagen suggests that the reform has also had some undesirable effects.

’The intention of the reform was that more people should work and be self-sufficient. But the overall picture that we see from our data is that people with health problems to a greater extent end up on temporary benefits such as unemployment benefits, cash benefits or perhaps without any income basis’, says Assistant Professor Natasja Koitzsch Jensen, Section of Social Medicine at the Department of Public Health.

The researchers have studied data from Danish and Swedish citizens between 50-59. Over the past few decades, both countries have tightened the requirements for award of permanent disability benefits in the hope that more people would be retained in the labour market. In both countries, employment rates have been on the rise, but after the introduction of the reforms, relatively more people with health problems have ended up on temporary benefits.

’Our hypothesis was that in particular people with moderate health problems would fall between two chairs, i.e. the persons who may be too sick to work, but who, after the reforms, are not sick enough to be eligible for permanent disability benefits. And that is exactly what our analyses suggest’, says Natasja Koitzsch Jensen.

Financial Uncertainty May Lead to Mental Disorders
‘For the affected group, the transition to unemployment benefits, cash benefits or no support can cause great concern in itself, on top of the health problems. Previous studies have shown that an uncertain or gone income basis can have great significance for human health’, says Natasja Koitzsch Jensen.

’A recent Danish study shows that among people who receive temporary welfare benefits, mental disorders are more prevalent. It is important to find out if the reforms work as intended in order to clarify if rather than retaining people in the labour market, the reforms simply move people to temporary benefits that cause more financial stress’, she says.

Research shows that some of the persons with temporary benefits such as cash benefits and unemployment benefits are actually sick. According to Natasja Koitzsch Jensen, this may be part of the explanation why financial incentives do not work to bring this particular group back to the labour market.

Facts about the Study
The analysis is based on data from The Survey of Health, Aging and Retirement in Europe (SHARE). The researchers used data for people aged 50-59 from Denmark and Sweden, dividing them into three groups according to health status (good health, moderate health problems or severe health problems) and income basis (people working, people receiving permanent disability benefits or people receiving temporary/no benefits).

The total number of observations made was 5,384. Before the reform, the figure in Denmark for people with moderate health problems who were receiving temporary or no benefits was 7.4% (19 persons). Just after the introduction of the reform in 2013, the figure was 11.5% (46 persons). In 2015, it was 11.9% (41 persons).

For the group with severe health problems, the figure for people receiving temporary or no benefits was 18% (11 persons) before the reform. In 2013, the figure was 19.1% (22 persons). In 2015, the figure was 23.3% (24 persons).

The analysis was made based on an overall picture of the development in Sweden and Denmark.

The article ‘Too sick to work, too healthy to qualify: a cross-country analysis of the effect of changes to disability benefits’ was published in Journal of Epidemiology and Community Health.

Assistant Professor Natasja Koitzsch Jensen
+45 35 33 73 28