Positive welfare state dynamics? Sickness benefits and sickness absence in Europe 1997-2011

Sickness absence is associated with great costs for individuals, companies and society at large. Influenced by neo-classical economic theory, policy advice has emphasized the role of sickness benefit programs for reducing sickness absence rates: too generous benefits without proper control will increase the number of recipients and prolong absence spells as well as possibly cause negative dynamic effects in the long term. This study provides an alternative interpretation of the relationship between sickness benefits and sickness absence. By combining an epidemiological approach to sickness absence and a resource-based approach to welfare, we argue that sickness benefits might be viewed as a "collective resource" that, by providing economic support during times of ill-health, might have positive health effects. Statistical analysis of short-term sickness absence using innovative methodological approaches and combined micro- and macro-level data for 21 EU countries over the period of 1992-2011 indicates that the long run effects of relatively generous sickness benefits is rather to reduce sickness absence. This result also has implications for sickness benefit reform: whereas benefit cuts to some extent may reduce absence in the short run, in the longer run such reforms may actually increase sickness absence rates.