Welfare benefits and work disincentives

Abstract

Unemployment among people with mental health problems is disproportionately high. Despite this many wish to work. The welfare benefits system presents one of the most significant barriers to employment, training and study. This paper examines the financial implications of moving from welfare to work. Five case studies are presented and measures of welfare dependency are compared. The findings show that people with mental health problems face greater unemployment and poverty traps than the general population. It appears that there are few circumstances that would make a move into paid work financially viable. The recently introduced Disabled Persons' Tax Credit does little to improve this situation. Disincentives are created by complex, inflexible and arbitrary rules for disability and housing benefits. Further measures are required to promote the inclusion of people with mental health problems in the labour market.