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Netherlands Not a Model for U.S. Disability Reforms

February 18, 2015 at 3:06 PM

Critics of Social Security Disability Insurance (DI) often cite the Netherlands —  where several rounds of disability reform have tightened eligibility, trimmed benefits, and imposed greater responsibilities on employers — as a possible model.  But while the Dutch experience may provide useful insights, here are some things you need to know:

  • The Netherlands spends far more than the United States on disability benefits. Even after the reforms, Dutch spending (as a share of gross domestic product or GDP) ranks near the top among the 34 advanced countries tallied by the Organisation for Economic Co-operation and Development.  (See graph.)  The U.S. ranking?  Near the bottom.
  • The Dutch disability programs needed significant reforms; the U.S. programs don’t. Until the mid-1990s, the Netherlands spent six to eight times as much on disability programs as the United States, relative to GDP; even now it spends about twice as much.  The gap has shrunk because the Dutch cut spending, not because the United States expanded it.
  • Overall protection for people in poor health is far more extensive in the Netherlands than in the United States. For example, the Dutch system pays benefits for partial or temporary disability as well as full, permanent disability; DI and Supplemental Security Income only cover very severe impairments that’ll last at least one year or result in death.  The basic Dutch benefit is 75 percent of a worker’s wage; average DI benefits replace about half of past earnings.  Dutch employees get two years of employer-paid sick leave at 70 percent or more of their usual earnings (unless they’ve been on the job for less than two years, in which case the taxpayers pay); the U.S. has no mandatory paid sick leave and a five-month waiting period for DI — a wait that may stretch much longer.  Finally, health coverage is universal in the Netherlands, in contrast to the U.S. patchwork.
  • Adopting Dutch reforms “on the cheap” would be a terrible idea. The Dutch system is carefully integrated, so we shouldn’t just import selected features.  Tasking employers with greater responsibility for paid sick leave, without safeguards like an exemption for the recently hired, could lead to discrimination in hiring and firing.  Similarly, reviewing current beneficiaries under new, stricter criteria (as the Dutch did in 2006) without having a partial-disability system as a backstop would be harsh and even counterproductive, as we learned when a comparable U.S. initiative in the early 1980s unfairly cut off many beneficiaries.