Standard of living of working age disability benefit recipients in the UK

We look at the standard of living and health of working-age disabled people and disability benefit recipients over time in the UK. The UK disability benefit system (which is not means-tested and in which receipt is not linked to employment status) has undergone a significant transformation since 2013 with the gradual replacement of the Disability Living Allowance (DLA) through the Personal Independence Payment (PIP). We establish four essential facts. First, 6% of people of working age now receive disability benefits, compared to 2% in 1992-93. This increase was fueled by claims for mental health problems and other psychiatric disorders, which are now the main disabling condition for 44% of claimants (27% in 2002-2003). Second, almost half of the people in the tenth of the most materially disadvantaged population are disabled, but most of this group does not receive disability benefits. Third, during the period when the DLA was replaced by the PIP, a larger fraction of those in poorer health began to receive disability benefits, suggesting that the targeting of benefits is improved on this margin. Fourth, simple event studies examining employment in the years around the reduction in disability benefits (following a government health reassessment) find no change before, but a large increase (4 points percentage) immediately after the loss of benefits, which reaches 10 ppts four years later. This is not enough to compensate for the loss of income on average, and income poverty increases by 10 percentage points in the year following the reduction. Nevertheless, we find limited evidence of changes in claimants’ own assessment of their financial situation, suggesting that benefits are being withdrawn at a time when they are least needed.