Disabled people in a dynamic model of labour supply and labour market transitions

In 2003, the Department for Work and Pensions (DWP) commissioned the Institute for Fiscal Studies (IFS) to estimate a model of labour market transitions, in other words, of moves into and out of work (paid employment). The specific aim of the project was to include disabled men and women in such a model. Including disabled people is important because a large proportion of men and women of working age who are not in work are disabled, and excluding them from a model of work and non-work limits the usefulness of the analysis. The model is still far from a definitive methodology concerning labour market behaviour of disabled people. In fact, some of the findings seem surprising and will require further analysis. It is, however, an important step towards understanding the determinants driving labour market decisions of people with disabilities.

The model uses data from the UK Labour Force Survey (LFS), which operates as a fivequarter Ѳolling panelҮ This allows us to look at whether people in the LFS are in work when they are first surveyed (wave 1), and again a year later (wave 5). In this way we can look at actual dynamics in the labour market (i.e. movement from employment to non-employment, and vice-versa) rather than just looking at a static ѳnapshot' of the labour market; this is one of the key advantages of modelling labour supply in this way.