People who leave long-term disability benefits and return to work could find themselves up to £1,200 worse off a year than if they remained without a contract, an analysis of Britain’s sick leave crisis warns.
The Institute for Fiscal Studies (IFS) found that someone working part-time for 16 hours a week or more at the National Living Wage (NLW) would see their income fall dramatically as benefits are cut. donations.
They would have to work at least 22 hours a week before their income returned to the level they received in the form of donations.
And their income would only increase by £2,200 a year if they started working a 35-hour week in the NLW, earning £20,900 a year.
By contrast, a person on Universal Credit could see a financial benefit of around £3,500 in annual income if they work less than 16 hours a week in the NLW, a level called “limited capacity for work or work-related activities” or LCWRA.
More than four in five people claiming disability benefits have not worked in the past two years, analysis shows
But if they exceed this threshold, they could be reassessed by the Department for Workforce and Pensions and lose some of their Universal Credit, putting them at a huge financial disadvantage in working.
Compared to what they would make in profit, this represents a potential loss of £5,000 a year.
In summary, the IFS said this was a colossal disincentive for long-term sick leave benefit claimants to look for work above this threshold and many, nervous about accidentally tipping over for any reason, may work even less.
This comes after it was revealed that more than four in five people claiming disability benefits have not worked for the past two years.
The IFS said the figures illustrate the challenge facing the Government as it aims to get more people back to work and boost growth.
“The longer a person is out of work, the less likely they are to return to work,” the report reads.
It came as separate official figures show the number of people out of work due to long-term illnesses has fallen slightly to 2.75 million, the lowest level for almost a year, although still close to record levels.
Britain has been suffering its longest sickness absence epidemic for a quarter of a century and younger and older workers are driving the trend, new analysis shows.
The IFS said getting more disability benefit claimants back to work was an “understandable goal”, with the number rising 28 per cent to 3.2 million since 2019.
IFS figures show that only 5.1 per cent of disability benefit claimants were working, while 82.9 per cent had not worked in the last two years.
It also said 83 percent of applicants were laid off with “the most severe level of disability,” meaning they “are likely a long way from re-entering the job market.”
Eduin Latimer of the IFS said: “There are unlikely to be easy solutions to the growing percentage of the population out of work due to health problems.”
The news comes after an earlier report found that unemployment due to long-term illness has risen six-fold in some parts of Britain since before Covid.
In July, people languishing at home due to illness peaked at 2.8 million, up about 700,000 before the pandemic hit the country.
Rising rates of mental illness have fueled the “economic inactivity crisis”, which Labor has promised to tackle as part of its plans to boost the economy and save taxpayers billions in welfare payments.
Surprisingly, young people are now just as likely to be out of work due to long-term illnesses as people in their 40s, according to the Resolution Foundation.
MailOnline’s analysis of official statistics shows that more than 14 per cent of Dover’s working-age population is now estimated to be “economically inactive” due to long-term illness, or 9,700 people.
In comparison, the figure was almost 2.5 per cent in 2019-20.
And earlier this year it was revealed that soaring workplace illnesses are costing UK businesses an extra £30bn a year and sick days have doubled since 2018, reveals a report.
Employees now call in sick an average of 6.7 days a year, up from 3.7 days six years ago.
This means the annual cost of staff absence has risen by £5bn over this period, analysis by the Institute for Public Policy Research has revealed.
However, the biggest cost to businesses comes from “presenteeism”, when Britons turn up to work despite being unwell and unable to give their best, think tanks say.
Their report says that a typical employee now loses the equivalent of 44 days of productivity a year due to working sick.
Researchers found this is up from 35 days since 2018, with the extra days of downtime generating profits of £25bn a year.
IFS data also revealed a 150 per cent increase in new disability claims by under-40s over the past four years, and a sharp rise in the number of claims for mental health benefits.
The research highlighted how benefit claims are rising at a much faster rate in Britain than elsewhere, although other comparable countries have also seen an increase in reported disability cases.
It comes after health secretary Wes Streeting revealed the government wants to use fat-busting measures like Ozempic to boost the economy and get unemployed obese Britons back to work.
Weight-related illnesses cost the economy £74 billion a year, and overweight people are at higher risk of heart disease, cancer and type 2 diabetes.
The controversial plan has the backing of Prime Minister Sir Keir Starmer, who insisted it could help ease demands on the NHS and boost the economy.
This despite dire warnings that around 3,000 Britons have fallen ill so far this year after taking Ozempic and Wegovy.
Defending the drugs, the prime minister told the BBC: “I think these drugs could be very important for our economy and for health.”
And he added: ‘This medicine will be very useful for people who want to lose weight, they need to lose weight, it is very important for the economy, so that people can go back to work.
‘Very important for the NHS because, as I have said time and time again, yes, we need more money for our NHS, but we need to think differently.
‘We have to reduce the pressure on the NHS. So this will help in all those areas.”
However, NHS bosses have privately warned that the plan risks overwhelming a service already stretched to breaking point.