Dismissal through disability

If a firm wants to reduce its workforce, it may dismiss some of its workers. Alternatively, it may make workers eligible for disability benefits. Upon examination these workers formally satisfy the conditions for disability enrolment. Because these conditions allow for a rather liberal interpretation of disability, these workers could have stayed in their job had they not become redundant. We use data on Dutch firms to show that at the end of the 1980s about 10 per cent of the observed inflow into disability were in fact dismissals. Comparing our results with those from previous studies we conclude that due to the social security reform of 1987 the use of disability enrolment to avoid dismissals has been substantially reduced.