The changing face of disability insurance

Alain Jousten, Mathieu Lefebvre, Sergio Perelman

13 August 2011



Disability insurance has for a long time been a rather unspectacular programme attracting limited attention and scrutiny. However, in light of the current economic and financial developments, disability insurance is moving back into the spotlight.

The underlying economics are rather simple. Faced with an uncertain job and income perspective, individuals are increasingly tempted to try the “disability route” of labour-force exit. Governments are facing increasingly difficult choices and have to find ways to contain costs.

Belgium is an interesting case study, with economic policy lessons far beyond the borders of this small (and increasingly disparate) country.

Figure 1. Disability insurance in Belgium and the Netherlands

Before delving any deeper into the Belgian specificities, it is worth looking across the northern border to the Netherlands. At the turn of the millennium, it was standing out as the champion of disability – with close to 10% of the population aged 20-64 in receipt of disability insurance, as compared to significantly lower rates in neighbouring countries. The economic explanation was straightforward: large numbers of people were admitted to the programme using a rather loose screening procedure, and once on the disability-insurance rolls too little effort was exerted to get people back to work. In a nutshell, disability insurance served as a (rather generous) early retirement route, not as mere protection for those with severe disabilities.

Faced with the budgetary and labour-market consequences, Dutch politicians and social partners initiated a more than decade-long reform process to reduce the attractiveness of early exit from the labour force. A combined approach simultaneously attacking the various early exit routes finally led to success. Since its peak in 2002-2003, the number of disability recipients has decreased by a whopping 25% (see Figure 1). Euwals et al (2011) provide an econometric analysis of the reforms using administrative data and conclude that the reforms have been effective.

Belgium could not be more different. For many years, claimant rates have grown, though in an unspectacular way (see Figure 1). The growth was most frequently attributed to the increasing labour force participation of women, which combined with an increase in the statutory retirement age almost mechanically leads to higher disability insurance enrolment given that people are rolled over into the retirement system at this age. The unspectacular nature of the growth was frequently attributed to a good screening of applicants. In a recent paper (Jousten et al 2011), we cast doubt on this rather contemplative analysis. The paper identifies two issues that – when combined – lead to a much more chilling reading of the present.

  • First, the disability-insurance system cannot be analysed in an isolated way – particularly in a country where there are numerous routes for early exit. With generous early retirement schemes widely available, it comes as no surprise that disability-insurance applications have barely reacted to economic cycles. It is likely that the unspectacular trends have more to do with the looseness of access to other schemes than the stringency of access to disability insurance.
  • Second, while aggregate indicators show some steadiness over the last decades, the composition of the disability-insurance pool has considerably changed with mental problems playing an increasing role as the decisive diagnostic (see Figure 2).

Figure 2. Breakdown of reasons for disability insurance

Recent administrative data covering the disability-insurance administration further reinforce the analysis. In 2010, for the first time, the total number of female disability-insurance beneficiaries surpassed the number of male beneficiaries – a trend well beyond any increase in labour-force participation. Similarly, the growth of disability-insurance rolls is highly heterogeneous, with women significantly more likely to be diagnosed with mental problems, and with male blue-collar workers having the most classical diagnostics and also the lowest growth rates.


In sum, two general policy lessons can be drawn from the above.

  • First, while macro data may be easily available, detailed micro data is an indispensible ingredient for a structured and informed discussion about the functioning of a system.

The striking data on diagnostic groups clearly highlight that very different trends are occurring in the population at large, with very different policy implications for individual subgroups.

  • Second, the screening efficiency of any individual system is close to a meaningless concept when numerous social insurance schemes interact in terms of eligibility and generosity.

Applied to the Belgian context, the conclusion is simple. Alarm bells are ringing loudly, and policymakers should act. Yet the task is not an impossible one, as the Netherlands has shown.


Rob Euwals, Annemiek van Vuren, Daniel van Vuuren (2011), “The Decline of Early Retirement Pathways in the Netherlands: An Empirical Analysis for the Health Care Sector “, IZA DP 5810

INAMI (2011), “Rapport Annuel 2010”, Bruxelles.

Alain Jousten, Mathieu Lefebvre, Sergio Perelman (2011), “Disability in Belgium:there is more than meets the eye”, NBER WP 17114.



Topics:  Health economics Labour markets Welfare state and social Europe

Alain Jousten

Professor of Economics, HEC, University of Liège

Postdoctoral Fellow, CREPP, University of Liège

Professor of Economics, University of Liège