A primary role of the welfare state is to provide a safety net against adverse shocks such as becoming unemployed. Former MiSoC Director Mike Brewer and co-authors Emma Tominey and Thang Dang estimate the effect of a major welfare reform in the UK on mental health for unemployed claimants. In 2013 Universal Credit replaced six existing benefits, creating a simplified system of applications and payments, whilst simultaneously applying somewhat draconian policy rules including a commitment to intensive job search, a change in benefit income and a 5 week wait to receive the first benefit payment. Exploiting the staggered roll-out of Universal Credit across different UK areas and over time, the authors find the welfare reform was less able to mitigate negative mental health effects from entering unemployment by 28% of a standard deviation. The effect can be further decomposed into the proportion attributable to cuts in income and that coming from increased job search intensity. It is found that income cuts worsened, while increased job search intensity had a protective effect against mental health problems from entering unemployment.
