Privatizing Income Security for Disabled Workers: Unintended Consequences and Labour Market Imbalances

The need to address the overuse of public schemes for sickness benefits and disability insurance, to reduce labour distortions caused by such programs, and the desire to shift the schemes’ emphases away from mere maintenance of the benefits towards rehabilitation of the disabled, have motivated the Dutch Government to privatize income security for disabled workers. In the Netherlands, private employers are currently forced to continue to pay wages in case of worker sickness or disability for a period of 2 years. The purpose of this chapter is to consider the question whether the benefits of such policies outweigh the costs. Nowhere in Europe has the rate of growth of self-employed, temporary and flexible work relationships increased as it has in the Netherlands since the privatization movement. While it appears that the situation of many workers has improved (i.e. public disability enrolment numbers have decreased), the situation of many other workers has deteriorated (i.e. the group of employees who have no permanent employment has increased).