The effect of welfare reform on the health of the unemployed: evidence from a natural experiment in Germany

Abstract

BackgroundOver the past several decades, governments have enacted far-reaching reforms aimed at reducing the generosity and coverage of welfare benefits. Prior literature suggests that these policy measures may have deleterious effects on the health of populations. In this study, we evaluate the impact of one of the largest welfare reforms in recent history—the 2005 Hartz IV reform in Germany—with a focus on estimating its effect on the health of the unemployed.MethodsWe employed a quasi-experimental difference-in-differences (DID) design using population-based data from the German Socio-Economic Panel Study, covering the period between 1994 and 2016. We applied DID linear probability modelling to examine the association between the Hartz IV reform and poor self-rated health, adjusting for a range of demographic and socioeconomic confounders.ResultsThe Hartz IV reform was associated with a 3.6 (95% CI 0.9 to 6.2) percentage point increase in the prevalence of poor self-rated health among unemployed persons affected by the reform relative to similar but unaffected controls. This negative association appeared immediately following the implementation of the reform and has persisted over time.ConclusionGovernments in numerous European and North American jurisdictions have introduced measures to further diminish the generosity and coverage of welfare benefits. In line with growing concerns over the potential consequences of austerity and associated policy measures, our findings suggest that these reform efforts pose a threat to the health of socioeconomically disadvantaged populations.