Measuring the Impacts of Health Conditions on Work Incapacity – Evidence from the British Household Panel Survey

Abstract

The UK has experienced substantial increases in both the number of claimants of work incapacity benefit and the proportion of claims for mental health reasons. However, identifying causality between experiencing mental health problems and claiming benefits is complex as claiming disability benefits may be the instigator or result of having a mental health problem. We use longitudinal data from the British Household Panel Survey (1991–2008) to disentangle the relationship between claiming benefits and mental health problems. We model the probability of claiming disability benefits using a dynamic random‐effects probit model, which reduces the endogeneity bias in modelling the effects of health on claiming disability benefits. Mental health has the largest effect of all health conditions modelled on the probability of disability benefit claiming. We find that the causal effect of mental health on claiming disability benefits is substantially over‐estimated by cross‐sectional associations. The effect decreases in magnitude from 12.5 to 0.5 percentage points for males and 8 to 0.7 percentage points for females. Policymakers should pay attention to other important influences on claiming disability benefits as well as interventions to improve the health of the working‐age population.

Assessing the Evidence Base on Health, Employability and the Labour Market – Lessons for Activation in the UK

“…For those re-entering employment following a period on DB, but then failing to sustain work, a decline in health is a common feature (Dixon and Warrener 2008). Large-scale national population surveys such as the British Household Panel Survey (BHPS) suggest robust and long-term relationships between health and exclusion from work (Jones et al 2010), although as noted elsewhere in this Special Issue these data also highlight the importance of interactions between ill-health and spatial labour demand inequalities (Whittaker and Sutton 2015). Robroek et al's (2013) analysis of older workers' trajectories in 11 countries based on the 'Survey of Health, Ageing, and Retirement in Europe' confirms that poor health and health behaviours as well as other work-related factors may all play a role in exits from paid employment, although their significance may vary according to exit routes.…”