Elsevier

Social Science & Medicine

Volume 177, March 2017, Pages 158-168
Social Science & Medicine

Positive welfare state dynamics? Sickness benefits and sickness absence in Europe 1997–2011

https://doi.org/10.1016/j.socscimed.2017.01.042Get rights and content

Highlights

  • Sickness benefits may be important for people's chances of recovering from illness.

  • Sickness benefits in the past is important for present levels of sickness absence.

  • Benefit cuts may reduce absence in the short run but increase it in the long run.

Abstract

Sickness absence is associated with great costs for individuals, companies and society at large. Influenced by neo-classical economic theory, policy advice has emphasized the role of sickness benefit programs for reducing sickness absence rates: too generous benefits without proper control will increase the number of recipients and prolong absence spells as well as possibly cause negative dynamic effects in the long term. This study provides an alternative interpretation of the relationship between sickness benefits and sickness absence. By combining an epidemiological approach to sickness absence and a resource-based approach to welfare, we argue that sickness benefits might be viewed as a “collective resource” that, by providing economic support during times of ill-health, might have positive health effects. Statistical analysis of short-term sickness absence using innovative methodological approaches and combined micro- and macro-level data for 21 EU countries over the period of 1992–2011 indicates that the long run effects of relatively generous sickness benefits is rather to reduce sickness absence. This result also has implications for sickness benefit reform: whereas benefit cuts to some extent may reduce absence in the short run, in the longer run such reforms may actually increase sickness absence rates.

Introduction

Sickness absence is associated with considerable costs for individuals, companies and society at large (OECD, 2010). Multiple factors, ranging from proximate and concrete factors such as the health status of individuals, their working environment and economic incentives created by welfare systems, to more abstract changes in norms and attitudes has been put forward in order to understand variations and trends in sickness absence over time and between social groups and countries. For the present purpose, this literature can be divided into two main strands (Mazzuco and Suhrcke, 2010, Pouliakas and Theodossiou, 2013). One strand of literature, largely originating from neo-classical economic theory, considers sickness absence as a manifestation of workers' labour supply decisions. Another strand, henceforth called the epidemiological perspective, views sickness absence as predominantly caused by ill-health and infirmity.

The purpose of this study is to discuss these two approaches – the neo-classical and the epidemiological – with regards to the relationship between sickness benefits and sickness absence. Additionally, this study tests a set of hypothesis derived from these approaches using individual-level data for 21 countries from the European Labour Force Survey for the period of 1992–2011. The focus on sickness benefits means that we do not take into account a range of other theoretical explanations that have been proposed for explaining sickness absence (see e.g., Beemsterboer et al., 2009). Whereas rather specific hypotheses can be derived from the neo-classical perspective, the epidemiological perspective in itself has little to say about the nature of this relationship. However, by combining the epidemiological perspective with a resource-based view of welfare, a set of hypotheses can be formulated that in important ways contradicts the hypotheses derived from the neo-classical perspective. Hypotheses derived from the neo-classical perspective have been tested repeatedly; however, few alternative and theoretically-informed hypotheses on the relationship between sickness absence and sickness benefits have been formulated and subjected to empirical tests.

This study addresses a fundamental dilemma in research about sickness benefits and sickness absence, a dilemma that seldom is acknowledged by researchers and policy-makers. Work (with reasonably good working conditions) is generally beneficial to people's health as well as for the financial viability of the welfare state. Therefore, an often heard policy advice is that institutional reform should focus on reducing the economic incentives for workers to report sick, by for example, reducing benefits. However, if sickness absence is primarily a manifestation of the health status of individuals, reducing economic compensation during sickness may be detrimental to people's health. Being sick is often associated with additional expenses, and financial strain during sickness may lead to isolation, inactivity and other personal and social problems that may prolong the period of sickness absence. It is conceivable that due to a deterioration of health conditions, reducing benefits or tightening qualifying conditions will have very little effects on, or even increase, aggregate sickness absence rates in the longer run.

Section snippets

Sickness absence and the welfare state

The theoretical approach that most explicitly deals with the relationship between sickness absence and sickness benefits is neo-classical economic theory (see e.g., Barmby et al., 1991). This approach views sickness absence as the outcome of a rational decision-making process about how much labour to supply on the market, and as such, is largely determined by subjective evaluations of the cost and benefits associated with alternative courses of action. Although it is often (but not always)

Analytical approach

The empirical strategy used in this study is to use cross-sectional individual-level data from the EU labour force surveys (EU-LFS) for 21 countries for the years 1992–2011. From these, we construct so-called synthetic cohorts and then combine this data with country-level data on sickness benefits for the same set of countries and years. The essential idea in the synthetic cohort approach is to group individuals sharing some common characteristics – in the present case, year of birth, gender

Results

Table 1 depicts average values on the sickness benefit generosity index and the two measures of sickness absence; temporary reduction in working ability (TRWA) and TRWA plus temporary inability to work (TRWA + TIW). The two measures if sickness absence is here calculated as the number of persons reporting sick divided with the number of people in the labour force (*100).

Generally, countries in northern Europe such as Sweden, Norway, and Finland, as well as some Continental-European countries

Discussion

The analyses of the relationship between sickness benefits and sickness absence has for long been dominated by the view that such benefits provide powerful incentives for people to report sick or to stay on benefits longer than needed for strict medical reasons. This could have a detrimental effect both at the societal level - by rising public expenditures and lowering the tax base – and at the individual level, as sickness absence may lead to labour market marginalization and subsequent

Ethics approval

No ethics approval is needed since the paper is using publicly available, anonymized data.

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