Can disability benefits promote (re)employment? Considerations for effective disability benefit design

Previous OECD reports have concluded that disability policy has changed substantially in many OECD countries in recent decades. Nevertheless, large employment gaps remain between people with a disability and those without. This paper builds on earlier OECD analysis and recent extensions to OECD’s tax-benefit model (http://oe.cd/TaxBEN) for selected countries. The paper aims to assess the adequacy of income support programmes for people with reduced work capacity and their related work incentives. It describes how the system characteristics of these programs shape labour-market behaviour and employment. The paper finds evidence that the broader institutional setup of a disability programme does not necessarily have a major impact on key aspects of social-protection effectiveness. All types of scheme can achieve reasonable levels of benefit adequacy and broad benefit coverage for people with work limitations. However, design specifics matter considerably for people’s likelihood of (re-)employment.