Is there employment discrimination against the disabled? Melanie K Jones i. University of Wales, Swansea

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1 Is there employmet discrimiatio agaist the disabled? Melaie K Joes i Uiversity of Wales, Swasea Abstract Whilst cotrollig for uobserved productivity differeces, the gap i employmet probabilities betwee the disabled ad o-disabled is examied i the period followig the Disability Discrimiatio Act. The evidece is cosistet with a small positive effect of the legislatio for the disabled. Classificatio: I, J2, J7. Keywords: Disability, employmet, decompositio. i Correspodig author: Melaie Joes, Departmet of Ecoomics, Uiversity of Wales Swasea, Sigleto Park, Swasea SA2 8PP, M.K.Joes@swa.ac.uk. Ackowledgemets: The author would like to thak Peter Sloae, Paul Latreille, Phil Murphy ad David Blackaby for useful commets ad discussio. Material from the Quarterly Labour Force Surveys is Crow Copyright, has bee made available from the Office for atioal Statistics (OS through the UK Data Archive ad has bee used by permissio.

2 . Itroductio Disability is foud to have egative effects o labour market outcomes i the UK, regardless of data source or time period (Joes, Whilst average wages of the disabled are over 85% of their o-disabled couterparts, the gap i participatio is far wider, with the disabled employmet rate beig about half the o-disabled rate. The itroductio of the Disability Discrimiatio Act (DDA, of 995, was desiged to protect the disabled agaist discrimiatio ad to facilitate ad ehace their access to employmet by imposig obligatios o employers to make reasoable adjustmet to their premises ad employmet arragemets. This paper cosiders if employmet discrimiatio agaist the disabled i the UK has chaged durig the post legislatio period, by applyig the method itroduced by Deleire (200, which was used to examie the effect of the Americas with Disabilities Act (ADA o wage discrimiatio. This method differs from the traditioal decompositio techiques, which have previously bee applied to the UK ad which fid a uexplaied employmet differece of about 50% (Blackaby et al., 999 ad Kidd et al., The method of Deleire (200 further decomposes the uexplaied compoet ito discrimiatio ad uobserved productivity differeces, addressig the uobserved impact of disability o work capacity idetified i UK data by Madde (2004. Similar to the ADA, the employmet provisio i the DDA, which came ito force i December 996, makes it ulawful to discrimiate agaist disabled applicats or employees ad makes it the duty of the employer to make reasoable accommodatio to remove workplace disadvatage cocerig employmet arragemets (such as hours of work or physical features of the workplace. Whilst the legislatio may reduce barriers to employmet for disabled idividuals, it may have importat, 2

3 uaticipated egative effects through the additioal costs posed o employers (for the US, see Deleire, 2000, Acemoglu ad Agrist, 200. Bell ad Heitmueller (2005 is the oly other kow study of the employmet effects of the DDA, who adopt the methodology of Acemoglu ad Agrist (200, ad fid o evidece of a positive effect usig data from the British Household Pael Survey ad the Family Resources Survey. 2. Methodology Aual UK Labour Force Survey (LFS data are created usig idividuals i waves ad 5 from the four quarterly surveys. A compariso before ad after implemetatio of the DDA is ot possible due to chages i the defiitio of disability i the LFS i 997; istead data from the year after implemetatio, 997, are compared to ii The workig age populatio i Great Britai, is split ito three groups (j, the work limited disabled (D, the o-work limited disabled (D 2 ad the o-disabled (. Followig Deleire (200, assumig the o-work limited disabled have a health problem that does ot affect their productivity i work ad that discrimiatio will ot vary with the productivity effect of the disability, the true ifluece of discrimiatio ca be separated from the effects of observable ad the uobservable ifluece of health o productivity. iii The associated with idividual i, i group j, are deoted Y ij, while deotes the coefficiets for the jth group from a probit model of employmet αˆ j ii See Joes et al. (2003. iii I the LFS disability is self reported. Whilst the potetial bias (Boud, 99 is ackowledged, followig similar studies, it is ot examied here. 3

4 status, E, with sample size ij. iv A idividual is defied as employed ( E = if they j ij are a employee with a positive hourly wage, the o-employed ( E =0 comprise the rest of the populatio but exclude the self employed, upaid workers ad those o govermet traiig schemes. Idividual (age, qualificatios, marital status ad ethicity, family (presece of depedet childre ad other earer i the household ad housig related, together with regioal ad quarterly dummies, are icluded withi Y ij. The differece i the average predicted probability ( Pˆ ˆ P D betwee the o-disabled ad the work limited disabled is: ij Pˆ Pˆ D D = (/ Φ( Y ˆ i - (/ D Φ( Y ˆ id α D i= i= α ( This differece ca be decomposed ito a part explaied by differeces i observed ad a uexplaied or residual term (Gomulka ad Ster, 990. The former is give by: v ( Pˆ Pˆ D = (/ D ˆ* α - (/ D Φ( Y ˆ id α (2 i= explaied Φ( Yi * i= ad the uexplaied gap is: iv I 997, D =8446, D 2 =3534 ad =36684 for males ad D =82, D 2 =3640 ad =43533 for females. I 2003, D =7780, D 2 =4834 ad =27302 for males ad D =7938, D 2 =5309 ad =33023 for females. v Differeces i edowmets due to pre-labour market discrimiatio or the aticipatio of labour market discrimiatio are icluded withi the explaied part of the model ad caot be separated usig this framework. However, as Baldwi ad Johso (200 ote, pre-labour market discrimiatio will oly be importat for that sectio of the disabled sample, who were disabled from birth or as childre. 4

5 ( Pˆ Pˆ D uexp = (/ (/ D i= D i= Φ( Y ˆ α (/ Φ( Y i id ˆ* α (/ D i= D i= Φ( Y i Φ( Y ˆ* α + id ˆ α D (3 ad ˆ α * is the coefficiet vector that would prevail i the absece of differet treatmet amog the groups. Followig Deleire (200, the o-discrimiatory employmet structure is formed by poolig the o-disabled ad the o-work limited disabled; this removes the effect of discrimiatio, but does ot impose the same coefficiets o the work limited disabled sice the uobserved effect of disability o productivity will exist eve i the absece of discrimiatio. This eables discrimiatio to be isolated from uobserved differeces i productivity as follows: Pˆ ˆ = discrimiatio plus uobserved differeces i productivity (4 ( P D uexplaie d Pˆ ˆ = discrimiatio (5 ( P D 2 uexplaie d Pˆ ˆ - Pˆ ˆ P D uexplaie d = uobserved differeces i productivity (6 ( P D uexplaied ( 2 The equatios are also estimated separately for each geder for 997 ad As such, a timewise decompositio is also computed which separates the differece i employmet probability for group j ad geder k betwee 2003 ad 997 ito that explaied by chages i ad the uexplaied compoet that represets chages i treatmet after six years of legislatio. 5

6 3. Results The coefficiet estimates from the employmet probits are i accordace with expectatios ad are ot preseted here. vi Results from the stadard decompositios are preseted i Table. The differece i predicted employmet probability betwee the work limited disabled ad the o-disabled is substatial, at about 0.50 for me ad 0.40 for wome. Over 75% of this differece caot be explaied by differeces i ad, if the uobserved productivity differece betwee the groups were assumed to be zero, this uexplaied compoet would form a upper boud estimate of discrimiatio. The gap betwee the work limited disabled ad the odisabled has falle over time due to reductios i both discrimiatio ad the characteristic effect. Whe the o-work limited disabled are cosidered, the employmet gap is ear zero, the small egative measure idicatig the o-work limited disabled have a slightly higher employmet probability tha the o-disabled. The greater similarity i the labour market outcomes betwee the o-work limited disabled ad the o-disabled relative to the work limited disabled is cosistet with previous evidece from Madde (2004 ad DeLeire (200. Results from the Deleire (200 decompositios are preseted i Table 2. The discrimiatio compoet is actually egative, idicatig the o-work limited disabled receive favourable treatmet i the labour market ad so the etire uexplaied gap from the work limited decompositio is attributed to uobservable productivity differeces betwee the two groups. Over time the raw gap has arrowed, as has the cotributio of ad discrimiatio, but, while vi Results are available from author o request. 6

7 fallig i absolute terms, the productivity differece still explais the vast majority of the employmet gap i Results from the timewise decompositios are preseted i Table 3. The work limited disabled experieced approximately a 4 percetage poit icrease i employmet probability over time cosistet with the previous evidece of a arrowig of the employmet gap. This improvemet is ot commo across groups, with chages over time ragig from 0.6 to -.4 percetage poits for the other disability groups. For the work limited disabled, the icrease i employmet probability is maily due to chages i parameters or treatmet betwee the two periods (particularly for me, where 82% is uexplaied, cosistet with positive effects of policy chage over the period. 4. Coclusio Isolatig ad quatifyig the effect of discrimiatio agaist the disabled o employmet depeds crucially o assumptios made regardig the effect of disability o productivity. If the uobserved productivity differece betwee the work limited disabled ad the o-disabled groups is assumed to be zero, elimiatig discrimiatio would icrease employmet for the work limited disabled by 37 ad 33 percetage poits for males ad females respectively. However, whe the uobserved effect of productivity is cotrolled for, there is o evidece of employmet agaist the disabled ad policy should therefore focus o icreasig the productivity of the disabled. 7

8 Over time, the gap i employmet betwee the disabled groups has arrowed for both sexes, a improvemet that caot be explaied by chages i the of the disabled, particularly for me, cosistet with a positive effect of the legislatio o employmet. vii The reductio i the productivity compoet of the employmet gap is cosistet with a positive effect from both the workplace accommodatio compoet of the DDA. This paper, therefore, adds to the recet evidece of Bell ad Heitmueller (2005 i assessig the employmet impact of the DDA, although the preset evidece is more saguie cocerig the impact of the legislatio. vii It should be oted that other developmets i policy for the disabled have occurred over the same period, icludig the Disabled Perso s Tax Credit ad the ew Deal for Disabled People. 8

9 Table. Decompositio of employmet probabilities by disability status Males Predicted differece Differece due to Differece i parameters Females Predicted differece Differece due to Differece i parameters Work limited o-work Work limited limited o-work limited (24% 0.00 (-53% 0.0 (2% (2% (76% (53% (79% (88% (6% (2% (2% (83% 0.34 (84% (98% (88% (7% otes: Predicted differece calculated usig equatio (. Differece i ad parameters give by equatios (2 ad (3 respectively. 9

10 Table 2. Deleire (200 decompositio of employmet probabilities for work limited disabled Chage Males Predicted differece Differece due to 0.27 (24% 0.0 (2% observable Differece due to (8% (83% uobservable health Discrimiatio (-5% (-4% Females Predicted differece Differece due to (6% (2% observable Differece due to (95% 0.33 (88% uobservable health Discrimiatio (-% (-% otes: Figures relate to the differece betwee the work limited disabled ad the o-disabled. Predicted differece calculated usig equatio (. Differece i give by equatio (2. Discrimiatio is give by equatio (5 ad the uobserved productivity differece is give by (6. 0

11 Table 3. Timewise decompositio of employmet probabilities Male Female Work limited Predicted differece Differece due to (8% 0.07 (45% Differece i parameters (82% 0.02 (55% o-work limited Predicted differece Differece due to (72% 0.06 (-09% Differece i parameters (27% (209% o-disabled Predicted differece Differece due to (67% (89% Differece i parameters (32% 0.00 (0% otes: The equal treatmet structure is formed by poolig across the time periods.

12 Refereces Acemoglu, D. ad J. D. Agrist, 200, Cosequece of employmet protectio? The case of the Americas with Disabilities Act, Joural of Political Ecoomy 9, Baldwi M. ad Johso W.G. (200 Dispellig the myths about work disability, Paper prepared for the 998 IRRA Research Volume, ew Approaches to Disability i the Workplace. Bell, D ad A. Heitmueller, 2005, The Disability Discrimiatio Act i the UK: Helpig or hiderig employmet amogst the disabled?, IZA Discussio Paper o 476. Blackaby D., K. Clark, S. Drikwater, D. Leslie, P. Murphy ad. O Leary, 999, Earigs ad employmet opportuities of disabled people, Departmet for Educatio ad Employmet, Research Report o.33, ottigham Boud, J., 99, Self-reported versus objective measures of health i retiremet models, Joural of Huma Resources 26(, DeLeire T., 2000, The wage ad employmet effects of the Americas with Disabilities Act, Joural of Huma Resources 35, DeLeire T., 200, Chages i wage discrimiatio agaist people with disabilities: , Joural of Huma Resources 36, Gomulka, J. ad Ster,., 990, The employmet of married wome i the Uited Kigdom , Ecoomica 57(226, Hotchkiss J.L., 2004, A closer look at the employmet impact of the Americas with Disabilities Act, Joural of Huma Resources XXXIX, Joes, M. K. 2005, Disability ad the labour market: A review of the empirical evidece, WELMERC Discussio Paper Series, o

13 Joes, M. K., Latreille, P. L. ad Sloae, P. J. (2003 Disability, Geder ad the labour market, WELMERC Discussio Paper o Kidd M.P., P. J. Sloae ad I. Ferko, 2000, Disability ad the labour market: a aalysis of British males, Joural of Health Ecoomics 9, Madde, D., 2004, Labour market discrimiatio o the basis of health: a applicatio to UK data, Applied Ecoomics 36,