Norway should reform its sickness benefit system, says the OECD


07/11/2006 - Norway should reform its sickness benefit system and help more disabled people find work, according to a new OECD report.

Sickness, Disability and Work: Breaking the Barriers - Norway, Poland and Switzerland  analyses the sickness and disability policies of these countries and proposes steps the governments should take to cut the number of people claiming these benefits and help them back into the labour market.

The Norwegian sickness and disability benefit system has a good framework on paper but in practice the results are poor, the report finds. Despite an option for gradual re-entry from sickness into work and a detailed grid of partial disability benefits, most people receive a full benefit. And incentives to encourage the disabled to find work, by allowing them to keep their benefit temporarily when they start working, have had little impact.

Norway also has more people on disability benefits than any other OECD country (11.4% of the working-age population compared to an OECD average of 6%), and yet spends far more than any other OECD country on vocational rehabilitation and training to avoid inflow into long-term disability (0.8% of GDP compared to an OECD average of 0.2%). Taken together, public spending on sickness and disability benefits is higher than in any other OECD country.

To address these issues, Norway should introduce stricter obligations for the various actors and better enforced sanctions when obligations are not fulfilled. It should also create a balance between improved work incentives and tighter eligibility criteria. The report makes the following policy recommendations:

  • The assessment of disability still rests mostly with general practitioners (GPs). At a minimum, the GPs need to receive more instructions and their judgments need to be checked.
  • Rehabilitation and training have to become more effective. In particular, the period during which people receive a medical or vocational rehabilitation benefit without medical treatment or vocational measures has to be shortened.
  • More people need to move from disability into employment. Current barriers to employment include the award of permanent and full benefits to most applicants and the limited incentives for partial benefit recipients to increase their working hours.
  • In order to reduce the high level of sickness absence - the usual route to disability benefit - employers and employees have to be given more incentives to engage in the prevention of health problems. This will also require higher co-payments of employers to the costs of sickness absence.
  • The merger of the Public Employment Service and the National Insurance Administration should be facilitated by clear guidelines. There should be sufficient investment for training caseworkers of the merged institution and for proper performance monitoring.
  • The forthcoming reform of the old age pension system needs to consider the disability benefit system too. If not, there is a risk that, following the introduction of pension deductions for those retiring before the age of 67, more older workers will exit the labour market through the disability benefit system.

The report also finds the results of the reforms introduced in 2001 in the course of a tripartite agreement of the government and the social partners very disappointing. Sickness absence is almost as high as it was five years ago, the employment rate of disabled persons is virtually unchanged, at 45% compared to 83% for the non-disabled population, and the retirement age has fallen further. A follow-up agreement - with a stronger focus on the inclusion and integration of people outside the labour market - was signed for the period 2006-09. It stresses that "the government will not propose any changes to the current sick pay scheme during the period of the agreement unless all actors agree to do so". Given the lack of success so far, this standstill promise could become a big obstacle.

Journalists can obtain a copy of Sickness, Disability and Work: Breaking the Barriers - Norway, Poland and Switzerland by contacting the OECD's Media Division (tel. +331 4524 9700). For further information, please contact one of the authors in OECD's Directorate of Employment, Labour and Social Affairs: Christopher Prinz (tel. +331 4524 9483), Patrik Andersson (tel.+ 331 4524 8851) and Michael Förster (tel. +331 4524 9280).


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