Opinion & Commentary
Disability payment should not be de facto dole
Australia is the second best place in the world to live. That's the conclusion the UN makes in its latest Human Development Index, released last week. With a life expectancy of nearly 82 years, Australians are among the healthiest (and wealthiest) on the planet.
Yet despite scoring an impressive 0.979 out of a possible 1 for health on the index, more Australians are unable to work because of a disability than ever. There are more than 770,000 Australians on a Disability Support Pension.
As we have become healthier, the proportion of working-age people on a disability pension has doubled from about one in 40 in the mid-1980s to one in 20 in the mid-2000s.
In this trend we are not alone. There are more than 26 million Europeans and more than 12 million Americans on disability benefits. And despite the best efforts of policy-makers here and overseas, these numbers stubbornly continue to climb.
According to a new study by Hugo Benitez-Silva, Richard Disney and Sergi Jimenez-Martin published in the British journal Economic Policy, this is because we have failed to adequately differentiate between "health disability" and "work disability".
Health disability refers to measurable, objective changes in the health of a population. As doctors and scientists make medical breakthroughs, and as societies get richer and able to afford better health care, health disability should decline.
While health disability tends to be a steady, predictable and measurable state, work disability fluctuates with changes in the job market, and community and employer attitudes towards people with a disability in the workplace. The most striking example of how work disability fluctuates according to external conditions is the relationship between the unemployment rate and claims for disability benefits.
Both here and overseas, when the jobs market goes down, claims for disability payments go up.
In Australia, the unemployment rate rose from 4.2 per cent to 5.7 per cent between August 2008 and May last year. At the same time, the number of DSP applications grew by 23 per cent.
And it's not that unemployment makes us sicker. The Economic Policy study, which focused on the US and some European countries, found that while people are likelier to report that they have a disability during a recession, the actual incidence of disability does not go up.
In fact, the opposite is true. Many of the most common disabilities - back injuries and other physical conditions - increase when the economy is booming because more people are involved in manual jobs.
There is not even a particularly clear link between health disability and work disability. According to the study, "a significant minority of disability benefit claimants report they are in good or very good health, and a substantial proportion of non-claimants report they are in poor health."
This evidence mirrors the situation in Australia. Here, one-third of DSP recipients do not report themselves as having a disability.
For Benitez-Silva, Disney and Jimenez-Martin, the answer to why the number of people on disability benefits has continued to grow is clear. Disability benefit programs are largely designed with the assumption that most recipients have a serious disability that will prevent them from working again.
But we know that many of the people who go on to benefits can work again, when their medical condition improves, unemployment falls or social attitudes shift.
For many recipients, disability benefit programs have become de facto unemployment benefits, except with little incentive and no compulsion to leave.
The solution is to clearly differentiate between health disability on one hand and work disability on the other. Although one person's health disability may mean they won't realistically work again, another person's work disability may mean that with the right conditions they can return to the workforce.
The authors recommend loosening the link between disability benefits and job status. There is little incentive to look for a job if that means losing your disability pension and the secure income it brings.
By continuing to pay disability benefits to recipients who re-enter the workforce, perhaps for a limited time, policy-makers could improve the incentive for beneficiaries to look for work.
These findings are clearly relevant for Australia. Our disability pension assumes that few people who go on to it will leave for work. This becomes a self-fulfilling prophecy.
Differentiating between health disability and work disability may enable us to design a policy that provides the right help for those who need it, without destroying the incentive to work for those who don't.
Jessica Brown is a policy analyst at the Centre for Independent Studies. Her report, Defeating Dependency: Moving Disability Support Pensioners Into Jobs, was released by the CIS.
