Determinants and effects of benefit take-up: Insights from panel data and microsimulation
One of the overlooked issues of delivering social benefits to their target population is imperfect take-up. The literature, while limited, shows that a proportion of individuals or households eligible for social benefits do not claim it. This phenomenon is not limited to the UK, but is widespread across countries. There are various reasons why take-up of social benefits, especially means-tested, is far from perfect. Such factors include high claiming costs, administrative errors, lack of information about entitlements, and fear of stigma. This target inefficiency distorts the intended impact of social benefits as well as increases the degree of uncertainty surrounding estimates of budgetary implications and attainment of social policy objectives. Despite its relevance, the topic is however still poorly understood. How have the take-up rates evolved over the years? Have they increased or decreased, especially after the rolling out of Universal Credit? Why do eligible individuals choose not to claim benefits? Is non-claiming temporary or permanent? Are there groups in society that are more inclined not to claim social benefits? Answering these questions will help to move away from the assumption – common in the policy debate – of full compliance to benefit rules, provide new insights which can improve policy design, and fill research gaps in the literature.
The primary objectives of this project are:
- to estimate take-up rates for social benefits in the UK and how they have changed over time, particularly for Legacy Benefits and Universal Credit;
- to study the factors affecting take-up rates, focussing on the role of observed and unobserved characteristics of the eligible population, and how these interact with the characteristics of social benefits;
- to analyse the impact of imperfect take-up on a variety of social indicators;
- to explore the influence of targeted policy counterfactuals on take-up and associated social indicators, such as inequality and at-risk-of-poverty rates.
This study exploits a unique combination of UK longitudinal data (UKHLS) and eligibility simulations based on the UKMOD tax-benefit calculator. In simple terms, UKMOD identifies whether an individual is entitled to a specific benefit, while UKHLS allows us to identify whether he or she receives the benefit. Estimates of take-up rates are obtained by dividing the number of actual recipients by the number of eligible individuals.
We then exploit the longitudinal dimension of UKHLS, where the same individuals are followed over many years, to provide insights into key factors that drive take-up behaviour over time, to determine whether (non-)take-up of social benefits is temporary or persistent and whether there are innate characteristics of the individuals that explain this suboptimal behaviour.
The outcomes of this study can be valuable for policymakers and administrators by helping them to better understand how to improve the target effectiveness of policy programs. By tackling behavioural biases that can lead individuals to make suboptimal decisions, we can offer an alternative way to address inequality or poverty than directly intervening with traditional fiscal policy tools such as modifying eligibility conditions or benefit amount. Also, the study has the potential to make significant contributions to the global social policy literature by providing insights that can be applied to other countries.
Additionally, this research will be useful to scholars from various disciplines looking to understand the effect of benefit (non)-take-up on social outcomes (e.g., inequality) and individual outcomes (e.g., economic security, poverty and persistent poverty, deprivation, health and well-being).
Team members
Centre for Microsimulation and Policy Analysis
Prof Matteo Richiardi
Dr Daria Popova
Dr Patryk Bronka
Dr Justin van de Ven
Melchior Vella
Start date
15 Jan 2024
End date
15 Jan 2026
Funder
ESRC