Reducing the Generosity and Increasing the Conditionality of Welfare Benefits for People with Disability: “Turning the Supertanker” or “Squeezing the Balloon”?

Abstract

We compare outcomes of disability benefit applicants before and after a major Australian reform of disability benefits, with two groups of applicants who fulfilled the same medical impairment criteria accepted or rejected based only on application date. The reform reduced the generosity and increased the conditionality of welfare payments by shifting partially disabled claimants from disability benefits to unemployment benefits. This led to increases in the probability not only of switching out of unemployment benefits on to alternative benefits, but also of exiting welfare altogether. However, because those who exited had a higher probability of subsequently returning to welfare, the reform had no impact on the proportion receiving welfare 12 or 24 months later.