Capping welfare payments for workless families increases employment and economic inactivity: evidence from the UK’s benefit cap

Aaron Reeves; Mark Fransham; Mary Reader; Kitty Stewart; Ruth Patrick

doi:10.1111/ijsw.12651

Capping welfare payments for workless families increases employment and economic inactivity: evidence from the UK’s benefit cap

Aaron Reeves^*, Mark Fransham, Mary Reader, Kitty Stewart, Ruth Patrick

^*Corresponding author for this work

Social Policy and Social Work

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper, we examine the labour market effects of lowering the UK's benefit cap in 2016. This policy limits the total amount a working-age non-disabled household with no-one in employment can receive in social security. We treat the sharp reduction in this benefit cap as a natural experiment, comparing those at risk of being capped and those who were not before and after the cap was lowered. Drawing on data from ~500,000 individuals, we find that this reform reduced unemployment compared to those not at risk of being capped. The reform also increased economic inactivity, partly because the cap harmed mental health but also because those at risk of being capped were eligible to claim disability-related welfare payments that made them exempt. Limiting total monthly welfare payments of low income families may increase employment for some but it can also push others out of the labour market altogether.

Original language	English
Number of pages	14
Journal	International Journal of Social Welfare
Early online date	20 Feb 2024
DOIs	https://doi.org/10.1111/ijsw.12651
Publication status	E-pub ahead of print - 20 Feb 2024

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10.1111/ijsw.12651Licence: CC BY

Int J Soc Welfare - 2024 - Reeves - Capping welfare payments for workless families increases employment and economic
© 2024 The Authors
Final published version, 695 KBLicence: CC BY

Cite this

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