Disability employment in Australia and the OECD

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Disability employment in Australia and the OECD

Posted 2/12/2011 by Matthew Thomas

Accounting firm, PriceWaterhouseCoopers (PwC) has released a report outlining a series of principles that it believes should guide the implementation of the national disability insurance scheme proposed by the Productivity Commission. In the report, PwC cites statistics which indicate that Australia ranks 21st out of 29 Organisation for Economic Co-operation and Development (OECD) countries in employment rates for people with a disability. It also highlights the fact that Australia is ranked 27th out of 27 OECD countries when it comes to relative poverty risk for people with a disability.

The first of these figures begs the question: Why does Australia perform so poorly relative to other OECD countries in terms of employment of people with disability? And, relatedly, are there any lessons to be learned from other OECD countries as to how this situation might be improved?

In 2010 the OECD released the final report from its ongoing series, Sickness, Disability and Work: Breaking the Barriers. The report summarises a longitudinal review of good and bad policy practices across OECD countries in relation to the promotion of labour market participation of people with disability. It analyses labour market outcomes of people with disability and the performance of thirteen OECD countries, including Australia, in transforming their sickness and disability schemes to active support systems that promote work.

Generally speaking, the report finds that while the focus of disability policy across the OECD in the last decade or so has shifted from a passive to a more employment-orientated approach, ‘changes in outcomes have not kept pace with policy development’ (p. 3).

As Table 2.1 at page 51 of the Sickness, Disability and Work: Breaking the Barriers report illustrates, employment rates for people with disability were highest in Sweden, Iceland, Estonia, Mexico and Switzerland. At the other end of the spectrum, Poland, Hungary and Ireland all had low employment participation rates of people with disability, in both relative and absolute terms. Given these findings, it is reasonable to ask, why do Nordic and other northern European countries generally out-perform other OECD countries with regard to the employment of people with disability?

As the OECD sees it, the answer lies in part in the general economic and social model that is employed by these countries.

Drawing on Danish sociologist Gospa Esping-Andersen’s categorisation of three different types of welfare state, the OECD has argued that, generally speaking, the Nordic countries share a distinct social-democratic disability policy model. This model is broadly characterised by relatively generous and accessible disability benefits and broad and equitable employment support, with a strong focus on vocational rehabilitation.

By contrast, the liberal disability policy model (to which Australia more or less conforms) is less generous in terms of compensation, with lower benefit levels and a much higher threshold to get onto benefits. Employment policies are on an intermediary level and vocational rehabilitation is less developed.

The corporatist disability policy model (which covers a large number of countries in the south, east and west of Europe) has been described as intermediate, relative to the social democratic and liberal disability policy models. Disability benefits are relatively generous and accessible, but not as generous or accessible as under the social democratic model. Similarly, the focus on vocational rehabilitation and employment support is not nearly so pronounced as it is under the social democratic model.

In keeping with the above categorisation, Nordic and some northern European countries tend to spend more of their total disability-related funding on active labour market programs than other OECD countries. At the same time, Nordic countries’ public spending on disability benefits is also high by OECD standards. For example, while public spending on disability benefits totals two per cent of GDP on average across the OECD, for Norway and Sweden this amount is between four and five per cent.

As the OECD sees it, Nordic countries are to be lauded for their commitment to policies that seek to integrate people with disability into the labour market. Nevertheless, it argues that these countries risk undermining the potential of these policies through their overly accessible and generous compensation policies. In short, the OECD appears to be of the view that Nordic countries have not struck sufficient balance between the provision of income support and work incentives. That is, Nordic countries have provided substantial employment supports for people with disability, but these efforts to increase the employment of people with disability are being undermined through insufficiently stringent access to disability benefits.

In the case of countries like Australia, which generally conform to a liberal disability policy model, the OECD suggests that the opposite is the case. In these countries, it argues, ‘the stronger inbuilt employment incentives resulting from less generous benefits are only partly harvested with an intermediary integration policy focus’ (p. 90).

There are three brief points worth making in relation to the OECD’s assessment.

Firstly, the OECD’s proposition that in countries like Australia an increase in disability-related resources would enhance the employment participation of people with disability would appear to lend weight to arguments for the introduction of a national disability insurance scheme.

Secondly, it should be noted that the relative generosity of Nordic countries’ disability benefit systems means that fewer of their citizens with disability end up living in poverty. Generally speaking, working-age households with a person with disability are at a significantly higher risk of relative income poverty in a majority of OECD countries. However, there is significant variation in relative poverty risks across OECD countries and the risk is far lower in Nordic countries than it is in Australia which, as noted above, performs poorly on this measure.

Finally, in its analysis the OECD pays rather more attention to supply-side issues than it does to demand-side issues. That is, it tends to focus on barriers to the employment of people with disability (primarily, too accessible, generous and long-term disability benefits) that do not involve labour market conditions. These could include things such as: a commitment to full employment (that is, a situation in which there is no involuntary unemployment due to there being at least as many jobs as there are people seeking employment); creating decent work; and, promoting positive attitudes towards people with disability in the workplace.


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