Title
Contents
Acknowledgements 9
The Authors 10
Glossary and abbreviations 11
Summary 13
1. Introduction 19
1.1 The policy background 19
1.2 Pathways 20
1.3 The evaluation of Pathways 21
2. Participation in Pathways' components 23
2.1 Summary 23
2.2 Introduction 24
2.3 Data and measurement issues 25
2.4 Findings 29
2.5 Conclusions 31
3. The Return to Work Credit 32
3.1 Summary 32
3.2 Introduction 33
3.3 The RTWC and financial incentives to work 33
3.4 Receipt of the RTWC 38
3.4.1 Numbers receiving the RTWC 38
3.4.2 Duration of RTWC claims 41
3.5 Conclusions 42
4. Cost analysis 44
4.1 Summary 44
4.2 Introduction 45
4.3 Cost of staff 48
4.4 Cost of Choices 52
4.5 Cost of payments to individuals 54
4.6 Cost of fast-tracking Personal Capability Assessments 56
4.7 Total cost of Pathways 57
5. Estimating the financial benefits of Pathways 60
5.1 Summary 60
5.2 Introduction 61
5.3 How different are FRS and PED? 63
5.3.1 The characteristics observed 64
5.3.2 The similarity of the samples 65
5.4 Estimating benefit and labour market outcomes 66
5.4.1 Modelling employment, hours of work and benefit status 67
5.4.2 Estimating weekly earnings 71
5.5 Results 75
6. Assessing the costs and benefits of Pathways 82
6.1 Summary 82
6.2 Pathways' measured net benefits 83
6.3 Omitted costs and benefits 84
6.3.1 Omitted costs and benefits to Pathways participants 85
6.3.2 Omitted costs and benefits to the Exchequer 87
6.3.3 Omitted costs and benefits to third parties 88
6.4 Conclusions 90
7. Estimated indirect impact of Pathways 91
7.1 Summary 91
7.2 Introduction 92
7.3 Methodology 94
7.4 Data description 95
7.4.1 Benefit outcomes among those mandated onto the programme 96
7.4.2 Benefit outcomes among those not mandated onto the programme 98
7.4.3 Background characteristics 104
7.5 Results 106
7.5.1 Evidence on the direct impact of Pathways: benefit outcomes among those mandated onto the programme 106
7.5.2 Evidence on the indirect impact of Pathways: benefit outcomes among those not mandated onto the programme 109
7.6 Conclusions 120
8. Estimating the nationwide impact of Pathways to Work 122
8.1 Summary 122
8.2 Introduction 124
8.3 Methodology 125
8.4 Data description 127
8.4.1 Variation in background characteristics of IB claimants 127
8.4.2 Variation in past cumulative exit rates from IB by LA 129
8.5 Results 130
8.5.1 Evidence of the impact of Pathways to Work programme varying by individual and LA characteristics 130
8.5.2 Estimates of the impact of Pathways across Great Britain 133
8.6 Conclusions 137
9. Conclusions 140
9.1 The measured costs and benefits of Pathways 140
9.2 Omitted benefits and costs 142
9.3 Wider applicability of the findings 144
9.4 Concluding remarks 144
Appendix A. Methodological variants and checks done in the estimation of the cost-benefit analysis 146
A.1 Employment and benefit receipts estimation for different cohorts 146
A.2 Results from a multinomial logit estimation of benefit receipt and employment but not hours of work 147
A.3 Estimation of earnings 148
References 153
Table 2.1 Impact of Pathways on participation in services and on receipt of payments 30
Table 3.1 Numbers moving onto Pathways, the RTWC or into paid work by end of January 2007, Pathways areas only 38
Table 4.1 Pathways net staff costs per IB enquiry (April 2005 - March 2006) 51
Table 4.2 Net costs of Choices per IB enquiry (April 2005 - March 2006) 52
Table 4.3 Net costs of payments to Pathways participants per IB enquiry (April 2005 - March 2006) 55
Table 4.4 Net costs of Pathways per IB enquiry (April 2005 - March 2006) 57
Table 4.5 Overall estimated costs of Pathways per IB enquiry (April 2005 - March 2006) 59
Table 5.1 Dates of the outcome interview 63
Table 5.2 Background characteristics - comparison between PED and FRS 65
Table 5.3 Predicted impact of Pathways at time of final interview 68
Table 5.4 Financial benefits per person per week of impact 79
Table 5.5 Present value of total financial benefits per person: main estimates and variants 81
Table 6.1 Present value of total measured financial benefits per incapacity benefits enquiry 84
Table 6.2 Omitted costs and benefits 84
Table 7.1 Observed background characteristics of those moving onto IB, by area and time period 105
Table 7.2 Observed background characteristics of those already receiving IB, by area and time period 106
Table 7.3 Difference-in-differences estimate of impact of Pathways on exit rates of new claims of IB, by area and sex - standard controls 107
Table 7.4 Difference-in-differences estimate of impact of Pathways on exit rates of new claims of IB, by area and sex - lagged controls 108
Table 7.5 Difference-in-differences estimate of impact of Pathways on exit rates of existing Retirement Pension claims, by area and sex 110
Table 7.6 Difference-in-differences estimate of impact of Pathways on exit rates of existing IB claims, by area and sex 111
Table 7.7 Difference-in-differences estimate of impact of Pathways on exit rates of existing IS/Pension Credit with disability premium claims, by area and sex 112
Table 7.8 Difference-in-differences estimate of impact of Pathways on exit rates of existing SDAclaims, by area and sex 113
Table 7.9 Difference-in-differences estimate of impact of Pathways on exit rates of existing IS/Pension Credit without disability premium claims, by area and sex 114
Table 7.10 Difference-in-differences estimate of impact of Pathways on exit rates of existing JSA claims, by area and sex 115
Table 7.11 Difference-in-differences estimate of impact of Pathways on exit rates of existing Invalid Care Allowance claims, by area and sex 116
Table 7.12 Difference-in-differences estimate of impact of Pathways on exit rates of existing DLA claims, by area and sex 117
Table 7.13 Difference-in-differences estimate of impact of Pathways on exit rates of existing Bereavement Benefit claims, by area and sex 118
Table 7.14 Difference-in-differences estimate of impact of Pathways to Work on exit rates of existing Attendance Allowance claims, men aged 65 to 69, by area 119
Table 7.15 Difference-in-differences estimate of impact of Pathways to Work on exit rates of existing Widow's Benefit claims, by area 120
Table 8.1 Descriptive background statistics of those moving onto IB between 1 August 2004 and 30 November 2004, by area 128
Table 8.2 Estimated variation in the impact of Pathways on the likelihood of those moving onto IB not being in receipt of IB after six months, by background characteristics 132
Table 8.3 Estimated impact of Pathways on the likelihood of those moving onto IB not being in receipt of IB after six months, by area, choice of controls and specification 136
Table 9.1 Present value of total measured financial benefits per incapacity benefits enquiry 140
Table A.1 Predicted impact of Pathways at time of final interview: October 2003 areas only 147
Table A.2 Predicted impact of Pathways at time of final interview: April 2004 areas only 147
Table A.3 Pooled cohorts, four outcomes 147
Table A.4 October cohort, four outcomes 148
Table A.5 April cohort, four outcomes 148
Table A.6 Coefficient of the policy effect in the earnings equations 151
Figure 3.1 Budget constraint in 2006/07 for example IB recipient: single individual without children, minimum wage 34
Figure 3.2 Budget constraint in 2006/07 for example IB recipient: higher-wage individual with working partner and two children 36
Figure 3.3 Budget constraint in 2006/07 for example IB recipient: single individual without children, minimum wage, with no disability-related entitlements unless receiving IB 37
Figure 5.1 Distribution of age in the FRS and PED samples 66
Figure 5.2 Estimated distribution of weekly hours (both cohorts) 67
Figure 5.3 Difference in predicted probabilities (six outcomes), month by month estimate, FRS sample 71
Figure 5.4 Distribution of actual and OLS central predictions of log weekly earnings if employed 1-15 hours 72
Figure 5.5 Distribution of actual and OLS central predictions of log weekly earnings if employed 16-29 hours 73
Figure 5.6 Distribution of actual and OLS central predictions of log weekly earnings if employed 30 or more hours 73
Figure 5.7 Distribution of predicted earnings from OLS regression if employed 1-15 hours, with and without adding in residuals 74
Figure 5.8 Distribution of predicted earnings from OLS regression if employed 16-29 hours, with and without adding in residuals 74
Figure 5.9 Distribution of predicted earnings from OLS regression if employed 30 hours or more, with and without adding in residuals 75
Figure 5.10 Average net family income (excluding RTWC) in each of six modelled states 77
Figure 7.1 Percentage of those who moved onto IB no longer receiving, by month, area and time period 98
Figure 7.2 Percentage of benefit recipients moving off benefit, by month, area and period 102
Figure 8.1 Variation in the distribution of LA IB cumulative six month exit rates, by area of Great Britain 130
Figure 8.2 Distribution of LAs by exit rate at six months and number of IB claimants 134
Figure A.1 Distribution of actual log earnings and those predicted by OLS and Heckman selection models (without adding residuals) 152