The 2014 reforms to the Disability Support Pension (DSP) resulted in the removal of younger recipients with some work capacity from the DSP. What was the effect on household income and health outcomes for those removed from the DSP?
We find that outcomes differed significantly depending on living arrangements.
- Income: Former recipients living with a parent or a spouse were able to maintain household income. This is because both the recipient and their family member began to work, or work more paid hours. Individuals living alone were far less able to adjust. They primarily shifted to the lower-rate unemployment benefit and experienced a drop in total income.
- Health care use: People removed from the DSP saw a sharp rise in the use of antipsychotic medication, with this effect concentrated among men living alone.
Taken together, these findings have important implications for the design of income support payment. There are three key insights for policymakers:
- Informal safety nets matter: The differential impact by living arrangements highlights the importance of informal safety nets and household self-insurance in shaping outcomes.
- Unintended health consequences: The impact on removal from the DSP on antipsychotic medication underscores the potential mental health costs of income support payment changes when there are insufficient support mechanisms in place.
- Unemployment benefit: For those removed from the DSP and without in-house family support, the unemployment benefit became their main financial fallback, despite offering a lower payment level.
