Welfare reform: Employment, mental health and intrahousehold insurance
Think tank: CEPEO
Author(s): Mike Brewer; Thang Dang; Emma Tominey
July 14, 2023
This report from UK think tank CEPEO looks at the impact of entering unemployment under UC compared to the former system.
The UK Universal Credit (UC) welfare reform simplified the benefits system, combining six benefit applications into one, whilst creating strict incentives for full-time employment. Exploiting a staggered roll-out, we analyse the impact of entering unemployment under UC compared to the former system on mental health, future employment transitions and intrahousehold labour supply reactions. Groups with fewer intrahousehold insurance possibilities – single adults and lone parents – experience a mental health deterioration of 8.4-13.9% sd. Whilst these groups experience an increase in employment transition, it is to part-time work. For couples UC creates an intrahousehold reaction, increasing partners’ labour participation and UC partially or fully mitigates the mental health consequences of unemployment.