THE DURATION OF BENEFIT RECEIPT: NEW FINDINGS FROM THE BENEFIT DYNAMICS DATA SET.

• Author: Wilson, Moira

INTRODUCTION

Over the last decade, the duration of benefit receipt has been viewed with increasing concern. Yet until recently the information available on the length of time people stay on benefit has been less than ideal. Analysts have been forced to rely on cross-sectional measures of either the duration of benefits that are current at a point in time or the duration of benefits that are cancelled in a given period. Both measures suffer from inherent bias.

* The duration of current benefits is biased upwards because those who stay longer on benefit are more likely to be in receipt on a given date than those who stay for only a short period, and biased downwards because duration is calculated only part-way through the benefit spell.

* The duration of cancelled benefits is biased downwards in that those with long spells are less likely to cancel within a given period.

Because of these biases, and because they focus only on a single period on benefit, the cross-sectional measures leave some key questions unanswered: How long do people generally stay on benefit? How likely are they to return to benefit? How common is long-term benefit receipt and to what extent is it associated with intermittent rather than continuous benefit use? Who is most at risk of long-term receipt? Answers to these questions should shape both our understanding of long-term benefit use and our policy response to it.

In 1995, development of an Information Analysis Platform in the Department of Social Welfare permitted a more robust picture of benefit duration to be obtained. It enabled the construction of a longitudinal data set that records the dynamics of benefit use at the individual level. With this "benefit dynamics" data set, we are able to examine the experiences of people who started to receive benefit at a common point in time, and to derive unbiased and more comprehensive measures of benefit duration. This paper uses a recently updated and enhanced version of the benefit dynamics data set(2) to offer new insights into the duration of receipt of the main working-age social welfare benefits.(3) It focuses on people granted benefit in 1993 for whom it is now possible to examine the pattern of benefit experiences over a full five-year period.(4)

THE BENEFIT DYNAMICS DATA SET

When a person applies to receive a benefit, they are asked to supply information needed to assess whether they qualify for support, and to establish the type of benefit they should receive, the level of payment they are entitled to, and any conditions of entitlement that should apply. Once granted benefit, they are required to provide information on any changes in circumstances that might affect their entitlement, and regular renewals of their benefit are carried out to check that the information previously supplied remains current. Finally, when the benefit is cancelled, a reason for cancellation is recorded.

Information collected at these various points is entered on the benefit payments system (SWIFTT), together with the person's basic demographic details, and information generated in the administration of the benefit such as the date payment commenced and ceased, the district office through which it was paid and the rate of benefit paid. Using this data, and linking information recorded for the same individual over time, the benefit dynamics data set builds up a longitudinal picture of benefit experiences. The data set is anonymous and is used solely for research purposes.

Like other longitudinal data sets built from administrative data, the benefit dynamics data set has its limitations.(5)

* It is limited in its scope to the information that is collected in the process of benefit administration. Information on education and work history, for example, is not collected.(6)

* It is limited to information relating to periods of benefit receipt. Robust measures of work status, income levels and family circumstances between periods on benefit are not available.

* For measures that are collected, the proportion of people for whom information is missing can be sizeable. This is particularly problematic for ethnicity.

* Changes in status that are recorded may be the result of administrative practices rather than genuine changes in recipient circumstances. For example, if a person fails to make contact when requested their benefit may be suspended, then cancelled, but subsequently re-granted when contact is re-established. The person's circumstances (unemployment, incapacity, or sole parenthood, for example) may have remained unchanged throughout.

* The quality of the data is highly dependent on the accuracy of reporting by clients and coding by front-desk staff.

* Finally, the data set is a "cleaned" reconstruction of the original SWIFTT source data for each individual (see below). Findings will, to some extent, be sensitive to the choices and assumptions made in assembling the data.

Against these limitations, the use of administrative data offers considerable advantages. The frequency and detail of information on changes in status is much better than could be achieved through a longitudinal survey. In addition, increasing the size of the sample studied imposes no additional costs aside from those associated with storing and processing the data. The large samples that can be attained permit examination of the experiences of narrowly defined subgroups while avoiding the usual problems arising from sampling error.

In the case of the benefit dynamics data set, we are able to hold information on the entire population of people who received benefits over the period of study. At the time of writing, the data set recorded the benefit experiences of the 1.1 million different adults who received one of the main working-age social welfare benefits, either as a primary recipient or as a partner, at some time in the period spanning 1 January 1993 to 31 December 1998. To put this number into context, we would need a count of all the different people who could have received benefit at some time over the period. It is not possible to calculate this number with certainty. The Annex to this paper presents two estimates. Viewing these as broad indications of scale suggests that around four people out of every ten present in the working-age population at some time between the beginning of 1993 and the end of 1998 are included in the data set.

PATTERNS OF BENEFIT RECEIPT

The remainder of this paper explores the benefit experiences of the 250,000 people who were granted a working-age benefit in 1993. Focussing on this group allows us to exploit the longest follow-up possible at the time of writing -- a full five years for every person granted benefit in that year.

It is important to note that those granted benefit in 1993 may have had prior spells on benefit. The 1993 "entry cohort" captures all people granted benefit in that year and is not confined to "first ever" entries into the benefit system. The experiences that emerge for any particular individual may, therefore, reflect the beginning, middle or end of a longer benefit history.

In addition, the patterns of benefit use observed for the 1993 entry cohort are not necessarily generalisable to other entry cohorts. The unemployment rate was higher in 1993 than in the years that followed. As a result, one might expect the 1993 entry cohort to have a greater representation than later entry cohorts of people for whom unemployment was a transitory experience. Changes in the age structure of the population, together with changes in net migration, patterns of family formation, fertility and labour force participation rates, are also likely to have altered the benefit experiences of successive cohorts.

Some Definitions and Assumptions

Of prime concern is the duration and frequency of spells of benefit receipt, where a spell is defined as a period of continuous receipt of the same benefit. In constructing the benefit dynamics data set, a number of assumptions are made:

* If a person is observed transferring from one benefit to another, the first spell is considered to have ceased and a new spell is considered to have commenced.(7)

* If a person is observed shifting their claimant status from being the primary recipient of benefit to the partner of a primary recipient or vice versa, a new spell is considered to have commenced.

* Where we observe two spells on the same benefit separated by less than fifteen days, they are amalgamated and treated as a single, uninterrupted spell.(8)

* Where we observe a single spell interrupted by a period in which benefit payment is suspended for a period of more than fourteen days, it is treated as two separate spells.

* Where a person transfers from a two-weekly to a weekly version of the same benefit,(9) or from a pre-October 1998 benefit to its post-October 1998 Community Wage equivalent, this is treated as a continuation of the original spell on benefit. Similarly, where a person transfers from Emergency Sickness Benefit to Sickness Benefit or from Emergency Maintenance Allowance to Domestic Purposes Benefit, this too is treated as a continuation of the original spell.

The analysis is broken down by the type of benefit each individual was granted as they entered the cohort. The following schema shows the benefits that are included. Domestic Purposes and Unemployment Benefits encompass a number of benefit payment categories: those grouped together under the same bullet point are treated as the "same benefit" in applying the spell definition assumptions described above; those itemised under separate bullet points are treated as distinct benefits in applying these assumptions.(10)

If a person was granted more than one benefit in 1993, their benefit at entry is the first benefit they were granted in that year. This has two implications that are important to bear in mind.

* The size of the 1993 entry cohort for a particular benefit type is somewhat smaller than the total number of grants of that...