Reducing the Generosity and Increasing the Conditionality of Welfare Benefits for People with Disability: Turning the Supertanker or Squeezing the Balloon?

We compare outcomes of disability benefit applicants before and after a major Australian disability reform, with two groups of applicants who fulfilled the same medical impairment criteria accepted or rejected based only on application date. The reform reduced the generosity and increased the conditionality of welfare payments by shifting partially disabled claimants from disability benefits to unemployment benefits. This led to increases in the probability of switching out of unemployment benefits onto alternative benefits, but also for exiting welfare altogether. Because exiters had a higher probability of subsequently returning to welfare, however, the reform had no impact on the proportion receiving welfare 12 months or 24 months later.