Welfare reform and recession: past labour market responses to job losses and the potential impact of Employment Support Allowance

The job losses which occurred as a result of deindustrialisation in the 1980s resulted in a large growth in male economic inactivity, and particularly an increased number claiming Invalidity, subsequently Incapacity Benefit (IB). This created high rates of IB claiming which have never been satisfactorily addressed by subsequent policies. In October 2008, Employment and Support Allowance (ESA) was introduced for new claimants to replace Incapacity Benefit. Between 2009 and 2013 those claiming under the old Incapacity Benefit will also be progressively transferred to the new regime. The changes were designed to both reduce on-flows to the benefit, as well as increase off-flows.