Mental health problems and lack of education locks people out of work

Published on 20 February 2017

IFS Director Paul Johnson writes in The Times.

Blackpool has hit the No 1 spot. It wasn’t even in the top ten at the turn of the century. Stoke-on-Trent, scene of a by-election this week, has reached No 15 (out of 377). Other climbers include Hastings, Hull and northeast Lincolnshire.

You’ve probably guessed that this isn’t a league table anyone would wish to climb. It measures the fraction of the working age population in receipt of incapacity benefits. One in eight people of working age in Blackpool receives such benefits. Astonishingly, in 2002, one in five of the working age population of Merthyr Tydfil received these benefits. Things have got better since then, but Merthyr is still third in the table.

These are benefits payable only to people who are deemed too sick to be capable of work. They are mostly means-tested and are not generous. You have to be poor as well as sick to receive them. And once you’re on, the chances are you’ll be stuck for a very long time.

We don’t pay enough attention to these benefits, or to the people who receive them. They tell us a lot about where the economy isn’t working and who it isn’t working for. They are also very costly.

Let’s start with the financial cost. The annual bill for incapacity and disability benefits, merely for people of working age and ignoring other benefits they are entitled to, comes in at £24 billion a year. That’s more than a third of all NHS spending on people of working age. It is a cost that has stubbornly refused to go down. In 2012 the government, rolling out a new benefit structure and new tests, hoped that the cost of incapacity benefits would have fallen by a quarter by now. Actually, it didn’t just hope that that would happen, that was its central forecast. Spending hasn’t fallen by a quarter. In fact, it has gone up.

Spending on benefits isn’t even the biggest economic cost of disability. Last week’s employment figures were, once again, fantastic, with the employment rate at a record level. Among those without a disability, more than 80 per cent are now in work, probably the highest rate in history. Yet only half of those with a disability are in paid work, dropping to only one in three of those with mental health problems. The sheer numbers of people with recorded disabilities make this economically very significant, indeed. About a fifth of people of working age say that they have some form of disability and more than 3.5 million of them are out of work.

Who those people are, where they live and the reasons for their disability all tell us rather a lot about the country we live in. Twenty years ago they were overwhelmingly older men, often living in former industrial and mining areas. Almost unbelievably, in the mid-1990s a quarter of all men aged between 55 and 64 were receiving incapacity benefits. In parts of south Wales, northern England and the west of Scotland, rates were much higher than that. This was the human consequence of the closure of much of the traditional heavy industry: long-term illness and long years spent out of the labour market and relying on benefits.

The pit and factory closures of the 1980s and 1990s still cast a long shadow, but it may be beginning to recede. Numbers on incapacity benefits have been falling in many of the affected areas. There is a new shadow, though, over places such as Blackpool and Hastings, Tendring and Thanet, where, bucking the national trend, the numbers receiving incapacity benefits have risen.

As the geography of disability-related unemployment has changed, so has its demography. There is now a much more democratic spread by age and gender. Older men are no longer hogging the illness and the benefits that go with it. Women have pretty much caught up. The gap between older and younger men has also closed to an astonishing degree. Life on incapacity benefits is increasingly the preserve of the poorly educated, irrespective of age. Twenty years ago highly educated older men were more than twice as likely as poorly educated younger men to be receiving incapacity benefits. That has now reversed. If you are a man in your twenties or thirties who left school at 16, you are now twice as likely to be out of work and on incapacity benefits than is a man with a degree in his fifties or sixties.

Therein lies a great shift in the economy. It is no longer the old who are left behind in the labour market, it is the low-skilled and the poorly educated of whatever age, especially those living in more peripheral areas. That so many are already consigned to long periods out of work and on incapacity benefits is a tragedy. And so is the reason for their disability. Growing rates of recorded disability and benefit receipt among younger people are largely driven by a growing prevalence of reported mental illness.

Never mind the huge economic costs. This shines a remarkably sharp light on where the human costs of our social and economic failures are felt. A recent green paper has signalled a shift in government focus from trying — and failing — to save money to helping more disabled people to engage with the labour market. Of course, being a government green paper it has to come with a target that certainly won’t be met any time soon — to halve the employment gap between the disabled and the rest.

The challenges of working with an overwhelmingly poorly educated population, many of them with mental health problems, should not be underestimated. But this surely, at last, is to shift the focus in the right direction.

This article was first published by The Times and is reproduced here in full with permission. Paul Johnson is director of the Institute for Fiscal Studies. Follow him on @PJTheEconomist.