The Financial Times

Rising disability rates test policymakers

By Ralph Atkins in Paris
Published: June 14 2006 03:00 | Last updated: June 14 2006 03:00

Soaring numbers of people on disability benefit across the industrialised world are becoming a "major policy concern" that has to be addressed as part of a re­appraisal of job-creation strategies, governments were warned yesterday.


Countries have successfully reduced unemployment rates in the past decade. But long-term sickness and disability benefit claimants have increased significantly, the Organisation for Economic Co-operation and Development concluded in a wide-ranging report on global employment trends.

The findings follow a two-year appraisal of a global job strategy launched by the rich countries' think-tank in 1994. They highlighted fears of policymakers around the world that measures to slash joblessness have increased the strains on other parts of the welfare system.

Angel Gurrķa, the Paris-based organisation's secretary-general, said that while the fight against unemployment remained an unfinished task, a "key priority" now should be to increase employment, especially as populations aged. Some 265m people of working age did not have jobs in the OECD countries, with 37m classified as unemployed.

Another 42m of the total are on long-term sickness and disability benefits, with many others drawing other welfare benefits, including payments for lone parents and early retirement, according to the OECD. "The rapid increase in the number of people on disability benefits is becoming a major policy concern in many countries," Mr Gurrķa said.

He also urged steps that encouraged the employment of older workers "who are in fine shape, and perfectly prepared to carry on working".

Although employment rates have risen in most countries, the OECD suggested that squeezing unemployment numbers had also pushed people into other categories. In some countries the increase in the number of people on sickness and disability benefit "has gone hand in hand with progress in reducing unemployment".

Evidence suggested "that a large proportion of those who enter these schemes could work and want to work - should the right conditions exist", it added.

"You have to close all the gaps, not just some, and that is quite a challenge," said Jean-Philippe Cotis, the director of the OECD's economic department.

Measuring the extent of the problem has baffled the OECD because of differences in welfare systems and the overlaps between different groups of benefit claimants.

But it cited data from 1999 - the latest available - showing the percentage of working-age people on disability benefits as being particularly high in the UK, Australia, the Netherlands, Sweden and Denmark. It may be no accident that these are among the countries that have made the most progress in cutting unemployment since the mid-1990s.

Two broad types of job-creation programmes had proved successful, Mr Gurrķa said. The first had been followed by the US where "everything is light and low" - taxes, welfare benefits and employment regulations. Other countries, such as Denmark and the Netherlands, had maintained generous welfare benefits but found other ways to get jobseekers back into work.

France, where unemployment remains about 9 per cent of the workforce, has been among the countries where politicians are looking to the "Danish model". But Mr Gurrķa said that a common feature of successful packages was an emphasis on strong competition in markets other than the labour market and macro-economic stability.

Among other successful countries cited by the OECD yesterday was Spain, where "ambitious labour and product market reforms" had helped slash the unemployment rate from more than 20 per cent 12 years ago to 9 per cent.