Summary

Since the late 1980s many policies have been premised on the assumption that people need to be coerced to find work, and there is much concern about the financial disincentives to work created by the benefit system.

The empirical evidence is that very few claimants prefer not to work or fail actively to engage in job search. Most people who become longterm unemployed appear to do so not as a result of receiving benefits, but because they do not have the attributes that would help them secure employment.

The evidence on disincentive effects is equivocal. Financial disincentives may be less important than uncertainty, risk aversion and the practical constraints imposed by complex systems and poor administration. Partners of unemployed claimants receiving benefits are less likely to work than those with employed partners, but only a fifth of the difference is due to financial disincentives created by the benefit system. On the other hand, there is some evidence of people on in-work benefits not seeking better paid work.

The largest portion of fraud relates to people working while claiming benefit. The work is typically casual and of short duration.