The Rise and Fall of Disability Insurance Enrollment in the Netherlands.

Abstract

As recently as 15 years ago, the high level of Disability Insurance (DI) enrollment was considered to be one of the major social and economic problems of the Netherlands; indeed, the Netherlands was characterized as the country with the most out-of-control disability program of OECD countries. But since about 2002, the Netherlands has seen a spectacular decline in its Disability Insurance enrollment rate. Radical reforms to the Dutch DI system were implemented over the period 1996 to 2006. We cluster these reforms in three broad categories: 1) reducing the incentives of employers to move workers to disability; 2) increased gatekeeping; and 3) tightening disability eligibility criteria while enhancing worker incentives. The reforms appear to have been very effective. Since 2002, yearly DI inflow rates dropped from 1.5 percent in 2001 to about 0.5 percent of the insured population in 2012. We argue that particularly the interaction of employer incentives and formal employer obligations has contributed to the substantial decrease in DI inflow. On the downside, however, it seems workers with bad health have sorted into temporary employment—without employers bearing the financial responsibility of their benefit costs.