- Email: [email protected]
Is there employment discrimination against the disabled?
Economics Letters 92 (2006) 32 – 37 www.elsevier.com/locate/econbase
Is there employment discrimination against the disabled? Melanie K. Jones * Department of Economics, University of Wales Swansea, Singleton Park, Swansea SA2 8PP, United Kingdom Received 31 May 2005; received in revised form 30 December 2005; accepted 5 January 2006 Available online 27 April 2006
Abstract Using differences in the work limiting nature of a disability, employment discrimination against the disabled is separated from the unobserved effect of disability on productivity. The UK evidence suggests unobserved productivity differences are an important influence on the employment gap. D 2006 Elsevier B.V. All rights reserved. Keywords: Disability; Employment; Decomposition JEL classification: I1; J2; J7
1. Introduction Disability is found to have negative effects on labour market outcomes in the UK, regardless of data source or time period (Jones, 2005). While average wages of the disabled are over 85% of their nondisabled counterparts, the gap in participation is far wider, with the disabled employment rate being about half the non-disabled rate. The introduction of the Disability Discrimination Act (DDA), of 1995, was designed to protect the disabled against discrimination and to facilitate and enhance their access to employment by imposing obligations on employers to make reasonable adjustment to their premises and employment arrangements. This paper examines employment discrimination against the disabled in the UK by applying the method introduced by DeLeire (2001), which was used to examine the effect of the Americans with Disabilities Act (ADA) on wage discrimination. This method differs from the traditional * Tel.: +44 1792 295168; fax: +44 1792 295872. E-mail address: [email protected]. 0165-1765/$ - see front matter D 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2006.01.008
M.K. Jones / Economics Letters 92 (2006) 32–37
33
decomposition techniques, which have previously been applied to the UK and which find an unexplained employment difference of about 50% (Blackaby et al., 1999; Kidd et al., 2000). Following DeLeire (2001) this paper further decomposes the unexplained component into discrimination and unobserved productivity differences, addressing the unobserved impact of disability on work capacity identified in UK data by Madden (2004). Similar to the ADA, the employment provision in the DDA, which came into force in December 1996, makes it unlawful to discriminate against disabled applicants or employees and makes it the duty of the employer to make reasonable accommodation to remove workplace disadvantage concerning employment arrangements (such as hours of work) or physical features of the workplace. While the legislation may reduce barriers to employment for disabled individuals, it may have important, unanticipated negative effects through the additional costs posed on employers (for the US, see DeLeire, 2000; Acemoglu and Angrist, 2001). Bell and Heitmueller (2005) is the only other known study of the employment effects of the DDA, who adopt the methodology of Acemoglu and Angrist (2001), and find no evidence of a positive effect using data from the British Household Panel Survey and the Family Resources Survey.
2. Methodology Annual UK Labour Force Survey (LFS) data are created using individuals in waves 1 and 5 from the four quarterly surveys. A comparison before and after implementation of the DDA is not possible due to changes in the definition of disability in the LFS in 1997; instead data from the year after implementation, 1997, are compared to 2003.1 The working age population in Great Britain is split into three groups ( j), the work limited disabled (D1), the non-work limited disabled (D2) and the nondisabled (N) on the basis of self-reported information. While the evidence relating to justification bias, which refers to the over-reporting of disability among the non-employed to justify their labour market state, remains mixed its potential influence to widen the employment gap should be acknowledged.2 In the present study this bias could also affect the distinction between work limited and non-work limited disabled and hence also exaggerate any employment gap within the disabled group.3 The characteristics associated with individual i, in group j, are denoted by Yij , while aˆ j denotes the coefficients for the jth group from a probit model of employment status, E ij , with sample size n j .4 An individual is defined as employed (E ij = 1) if they are an employee with a positive hourly wage, the nonemployed (E ij = 0) include both the unemployed and the inactive and the sample therefore excludes the self-employed, unpaid workers and those on government training schemes. Individual (age, qualifications, marital status and ethnicity), family (presence of dependent children and other earner in the household) and housing related characteristics, together with regional and quarterly dummies, are 1
See Jones et al. (in press). Stern (1989), Dwyer and Mitchell (1999) and Benitez-Silva et al. (2004) find no evidence to support the justification hypothesis. However, since no objective health information is available the issue cannot be examined in the current data set. 3 This would occur if, for example, an individual with a given disability is more likely to report it as non-work limiting if he/she is in employment. However, the questions are designed so that individuals who are not in employment can be non-work limited. They refer to the effect of health problems on the kind or amount of work an individual might do. 4 In 1997, n D1 = 8446, n D2 = 3534 and n N = 36684 for males and n D1 = 8112, n D2 = 3640 and n N = 43533 for females. In 2003, n D1 = 7780, n D2 = 4834 and n N = 27302 for males and n D1 = 7938, n D2=5309 and n N=33023 for females. 2
34
M.K. Jones / Economics Letters 92 (2006) 32–37
included within Yij . The difference in the average predicted probability (Pˆ N Pˆ D1) between the nondisabled and the work limited disabled is: Pˆ N Pˆ D1 ¼ ð1=nN Þ
nN X
UðYiN aˆ N Þ ð1=nD1 Þ
i¼1
nD1 X
UðYiD1 aˆ D1 Þ:
ð1Þ
i¼1
This difference can be decomposed into a part explained by differences in observed characteristics and an unexplained or residual term (Gomulka and Stern, 1990). The former is given by:5 " # " # nD1 nN X X Pˆ N Pˆ D1 ¼ ð1=nN Þ UðYiN a4 ˆ Þ ð1=nD1 Þ UðYiD1 a4 ˆ Þ ð2Þ explained
i¼1
and the unexplained gap is: Pˆ N Pˆ D1
unexplained
"
¼ ð1=nN Þ
i¼1
nN X
UðYiN aˆ N Þ ð1=nN Þ
i¼1
" þ ð1=nD1 Þ
nN X
# UðYiN a4 ˆ Þ
i¼1 nD1 X i¼1
UðYiD1 a4 ˆ Þ ð1=nD1 Þ
nD1 X
# UðYiD1 aˆ D1 Þ
ð3Þ
i¼1
and aˆ * is the coefficient vector that would prevail in the absence of different treatment among the groups. Following DeLeire (2001) the non-discriminatory employment structure is formed by pooling the non-disabled and the non-work limited disabled; this removes the effect of discrimination, but does not impose the same coefficients on the work limited disabled since the unobserved effect of disability on productivity will exist even in the absence of discrimination. Using the method proposed by DeLeire (2001) the true influence of discrimination can be separated from the unobservable influence of health on productivity. The decomposition relies on two assumptions, that the non-work limited disabled have a health problem that does not affect their productivity in work and that discrimination will not vary with the productivity effect of the disability. This enables discrimination to be isolated from unobserved differences in productivity as follows:6 Pˆ N Pˆ D unexplained ¼ discrimination plus unobserved differences in productivity ð4Þ
Pˆ N Pˆ D
Pˆ N Pˆ D
unexplained
unexplained
¼ discrimination
ð5Þ
PˆN PˆD2 unexplained ¼ unobserved differences in productivity
ð6Þ
While it is not possible to test the assumptions directly, the inclusion of a measure of severity of the disability (number of health problems) to proxy productivity is insignificant for the non-work limited disabled but is strongly significant and negative for the work limited disabled, supporting the first 5 Differences in endowments due to pre-labour market discrimination or the anticipation of labour market discrimination are included within the explained part of the model and cannot be separated using this framework. However this only applies to those who were disabled as children. 6 The unobserved effect of productivity may influence the probability of employment through its influence on work preferences and/or hiring by employers.
M.K. Jones / Economics Letters 92 (2006) 32–37
35
Table 1 Decomposition of employment probabilities by disability status 1997 Males Predicted difference Difference due to characteristics Difference in parameters Females Predicted difference Difference due to characteristics Difference in parameters
2003
Work limited
Non-work limited
Work limited
Non-work limited
0.527 0.127 (24%) 0.400 (76%)
0.018 0.010 ( 53%) 0.028 (153%)
0.473 0.101 (21%) 0.372 (79%)
0.023 0.003 (12%) 0.020 (88%)
0.404 0.063 (16%) 0.341 (84%)
0.044 0.001 (2%) 0.044 (98%)
0.372 0.046 (12%) 0.326 (88%)
0.024 0.020 (83%) 0.004 (17%)
Predicted difference was calculated using Eq. (1). Differences in characteristics and parameters are given by Eqs. (2) and (3) respectively.
assumption. If discrimination is positively related to the work limiting nature of the disability the second assumption will not hold. The effect of severity on discrimination cannot be isolated in this framework since it will also influence the unobserved productivity effect.7 However, by assumption the non-work limited disabled have no unobserved productivity difference, therefore decompositions between the type of impairment within this group provide a test for variations in discrimination alone. The unexplained gap in the disability type decompositions are small with the exception of individuals with mental health problems, who have a lower employment rate relative to all other types of health problem that is not explained by differences in observable characteristics, consistent with variations in discrimination.8 If, as this suggests, discrimination is larger for the work limited disabled (6) will overestimate the influence of unobserved productivity differences by the difference in discrimination between the two groups.9 In this situation, the discrimination effect identified in (5) must be interpreted as a lower bound.
3. Results The coefficient estimates from the employment probits are in accordance with expectations and are not presented here.10 Results from the standard decompositions are presented in Table 1. The difference in predicted employment probability between the work limited disabled and the non-disabled is substantial, at about 0.50 for men and 0.40 for women. Over 75% of this difference cannot be explained by differences in characteristics and, if the unobserved productivity difference between the groups were assumed to be zero, this unexplained component would form an upper bound estimate of discrimination. When the non-work limited disabled are considered, the employment gap is near zero, the small negative
7
For example, the unexplained gap from a decomposition within the work limited disabled on the grounds of severity would capture any difference in discrimination but also any difference in productivity. 8 For example, the unexplained component between problems with limbs and mental health is 0.18 or 73% of the overall gap. 9 Individuals with mental health problems are concentrated in the work-limited group (14%) relative to the non-work limited disabled (3%). If there is an additional influence related to the work limiting nature, which cannot be identified here, it is also expected to increase discrimination against the work limited relative to the non-work limited disabled. 10 Results are available from author on request.
36
M.K. Jones / Economics Letters 92 (2006) 32–37
Table 2 DeLeire (2001) decomposition of employment probabilities for work limited disabled Males Predicted difference Difference due to observable characteristics Difference due to unobservable differences in productivity Discrimination Females Predicted difference Difference due to observable characteristics Difference due to unobservable differences in productivity Discrimination
1997
2003
Change
0.527 0.127 (24%) 0.427 (81%) 0.028 ( 5%)
0.473 0.101 (21%) 0.392 (83%) 0.020 ( 4%)
0.054 0.026 0.035 0.008
0.404 0.062 (16%) 0.385 (95%) 0.044 ( 11%)
0.372 0.046 (12%) 0.331 (88%) 0.004 ( 1%)
0.032 0.017 0.054 0.039
Figures relate to the difference between the work limited disabled and the non-disabled. Predicted difference was calculated using Eq. (1). Difference in characteristics is given by Eq. (2). Discrimination is given by Eq. (5) and the unobserved productivity difference is given by Eq. (6).
measure indicating the non-work limited disabled have a slightly higher employment probability than the non-disabled. The greater similarity in the labour market outcomes between the non-work limited disabled and the non-disabled relative to the work limited disabled is consistent with previous evidence from Madden (2004) and DeLeire (2001). Results from the DeLeire (2001) decompositions are presented in Table 2. The discrimination component, albeit a lower bound, is actually negative, indicating the non-work limited disabled receive favourable treatment in the labour market and so the entire unexplained gap from the work limited decomposition is attributed to unobservable productivity differences between the two groups. It is important to note that in the post DDA period the raw employment gap between the work limited disabled and the non-disabled has narrowed, as has the contribution of characteristics and discrimination, but, while falling in absolute terms, the productivity difference still explains the vast majority of the employment gap in 2003. The increase in the employment rate is specific to the work limited disabled and is not explained by a change in characteristics of the group over time. It is therefore consistent with the positive role of the DDA.11
4. Conclusion This study illustrates the potential problems created by ignoring the effect of unobservables in a decomposition analysis. Isolating and quantifying the effect of discrimination against the disabled on employment depends crucially on assumptions made regarding the effect of disability on productivity. If the unobserved productivity difference between the work limited disabled and the non-disabled groups is assumed to be zero, eliminating discrimination would increase employment for the work limited disabled by 37 and 33 percentage points for males and females respectively. However, when the unobserved effect of productivity is controlled for, there is no evidence of employment discrimination against the disabled and policy should therefore focus on increasing the productivity of the disabled. 11
Results from a within group time wise decomposition are also available on request.
M.K. Jones / Economics Letters 92 (2006) 32–37
37
Over time, the gap in employment between the disabled groups has narrowed for both sexes, consistent with a positive effect of the legislation on employment.12 The reduction in the productivity component of the employment gap is consistent with a positive effect from the workplace accommodation component of the DDA. This paper, therefore, adds to the recent evidence of Bell and Heitmueller (2005) in assessing the employment impact of the DDA, although the present evidence is more sanguine concerning the impact of the legislation.
Acknowledgements The author would like to thank Peter Sloane, Paul Latreille, Phil Murphy, David Blackaby and an anonymous referee for useful comments. Material from the Quarterly Labour Force Surveys is Crown Copyright, has been made available from the Office for National Statistics (ONS) through the UK Data Archive and has been used by permission.
References Acemoglu, D., Angrist, J.D., 2001. Consequence of employment protection? The case of the Americans with Disabilities Act. Journal of Political Economy 19, 915 – 950. Bell, D., Heitmueller, A., 2005. The disability discrimination Act in the UK: helping or hindering employment amongst the disabled? IZA Discussion Paper, vol. 1476. Benitez-Silva, H., Buchinsky, M., Chan, H.-M., Cheidvasser, S., Rust, J., 2004. How large is the bias in self-reported disability? Journal of Applied Econometrics 19, 649 – 670. Blackaby, D., Clark, K., Drinkwater, S., Leslie, D., Murphy, P., O’Leary, N., 1999. Earnings and employment opportunities of disabled people. Department for education and employment, Research Report, vol. 133. Nottingham. DeLeire, T., 2000. The wage and employment effects of the Americans with disabilities act. Journal of Human Resources 35, 693 – 715. DeLeire, T., 2001. Changes in wage discrimination against people with disabilities: 1984–1993. Journal of Human Resources 36, 144 – 158. Dwyer, D., Mitchell, O., 1999. Health problems as determinants of retirement: are self-rated measures endogenous? Journal of Health Economics 18, 173 – 193. Gomulka, J., Stern, N., 1990. The employment of married women in the United Kingdom 1970–1983. Economica 57, 171 – 199. Jones, M.K., 2005. Disability and the labour market: a review of the empirical evidence. WELMERC Discussion Paper Series, vol. 2005 – 04. Jones, M.K., Latreille, P.L., Sloane, P.J., in press. Disability, gender and the British labour market. Oxford Economic Papers. Kidd, M.P., Sloane, P.J., Ferko, I., 2000. Disability and the labour market: an analysis of British males. Journal of Health Economics 19, 961 – 981. Madden, D., 2004. Labour market discrimination on the basis of health: an application to UK data. Applied Economics 36, 421 – 442. Stern, S., 1989. Measuring the effect of disability on labor force participation. Journal of Human Resources 24, 361 – 395.
12
It should be noted that other developments in policy for the disabled have occurred over the same period, including the Disabled Person’s Tax Credit and the New Deal for Disabled People. It may also be the case that the disabled are more affected by cyclical changes.
Is there employment discrimination against the disabled? Melanie K. Jones * Department of Economics, University of Wales Swansea, Singleton Park, Swansea SA2 8PP, United Kingdom Received 31 May 2005; received in revised form 30 December 2005; accepted 5 January 2006 Available online 27 April 2006
Abstract Using differences in the work limiting nature of a disability, employment discrimination against the disabled is separated from the unobserved effect of disability on productivity. The UK evidence suggests unobserved productivity differences are an important influence on the employment gap. D 2006 Elsevier B.V. All rights reserved. Keywords: Disability; Employment; Decomposition JEL classification: I1; J2; J7
1. Introduction Disability is found to have negative effects on labour market outcomes in the UK, regardless of data source or time period (Jones, 2005). While average wages of the disabled are over 85% of their nondisabled counterparts, the gap in participation is far wider, with the disabled employment rate being about half the non-disabled rate. The introduction of the Disability Discrimination Act (DDA), of 1995, was designed to protect the disabled against discrimination and to facilitate and enhance their access to employment by imposing obligations on employers to make reasonable adjustment to their premises and employment arrangements. This paper examines employment discrimination against the disabled in the UK by applying the method introduced by DeLeire (2001), which was used to examine the effect of the Americans with Disabilities Act (ADA) on wage discrimination. This method differs from the traditional * Tel.: +44 1792 295168; fax: +44 1792 295872. E-mail address: [email protected]. 0165-1765/$ - see front matter D 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2006.01.008
M.K. Jones / Economics Letters 92 (2006) 32–37
33
decomposition techniques, which have previously been applied to the UK and which find an unexplained employment difference of about 50% (Blackaby et al., 1999; Kidd et al., 2000). Following DeLeire (2001) this paper further decomposes the unexplained component into discrimination and unobserved productivity differences, addressing the unobserved impact of disability on work capacity identified in UK data by Madden (2004). Similar to the ADA, the employment provision in the DDA, which came into force in December 1996, makes it unlawful to discriminate against disabled applicants or employees and makes it the duty of the employer to make reasonable accommodation to remove workplace disadvantage concerning employment arrangements (such as hours of work) or physical features of the workplace. While the legislation may reduce barriers to employment for disabled individuals, it may have important, unanticipated negative effects through the additional costs posed on employers (for the US, see DeLeire, 2000; Acemoglu and Angrist, 2001). Bell and Heitmueller (2005) is the only other known study of the employment effects of the DDA, who adopt the methodology of Acemoglu and Angrist (2001), and find no evidence of a positive effect using data from the British Household Panel Survey and the Family Resources Survey.
2. Methodology Annual UK Labour Force Survey (LFS) data are created using individuals in waves 1 and 5 from the four quarterly surveys. A comparison before and after implementation of the DDA is not possible due to changes in the definition of disability in the LFS in 1997; instead data from the year after implementation, 1997, are compared to 2003.1 The working age population in Great Britain is split into three groups ( j), the work limited disabled (D1), the non-work limited disabled (D2) and the nondisabled (N) on the basis of self-reported information. While the evidence relating to justification bias, which refers to the over-reporting of disability among the non-employed to justify their labour market state, remains mixed its potential influence to widen the employment gap should be acknowledged.2 In the present study this bias could also affect the distinction between work limited and non-work limited disabled and hence also exaggerate any employment gap within the disabled group.3 The characteristics associated with individual i, in group j, are denoted by Yij , while aˆ j denotes the coefficients for the jth group from a probit model of employment status, E ij , with sample size n j .4 An individual is defined as employed (E ij = 1) if they are an employee with a positive hourly wage, the nonemployed (E ij = 0) include both the unemployed and the inactive and the sample therefore excludes the self-employed, unpaid workers and those on government training schemes. Individual (age, qualifications, marital status and ethnicity), family (presence of dependent children and other earner in the household) and housing related characteristics, together with regional and quarterly dummies, are 1
See Jones et al. (in press). Stern (1989), Dwyer and Mitchell (1999) and Benitez-Silva et al. (2004) find no evidence to support the justification hypothesis. However, since no objective health information is available the issue cannot be examined in the current data set. 3 This would occur if, for example, an individual with a given disability is more likely to report it as non-work limiting if he/she is in employment. However, the questions are designed so that individuals who are not in employment can be non-work limited. They refer to the effect of health problems on the kind or amount of work an individual might do. 4 In 1997, n D1 = 8446, n D2 = 3534 and n N = 36684 for males and n D1 = 8112, n D2 = 3640 and n N = 43533 for females. In 2003, n D1 = 7780, n D2 = 4834 and n N = 27302 for males and n D1 = 7938, n D2=5309 and n N=33023 for females. 2
34
M.K. Jones / Economics Letters 92 (2006) 32–37
included within Yij . The difference in the average predicted probability (Pˆ N Pˆ D1) between the nondisabled and the work limited disabled is: Pˆ N Pˆ D1 ¼ ð1=nN Þ
nN X
UðYiN aˆ N Þ ð1=nD1 Þ
i¼1
nD1 X
UðYiD1 aˆ D1 Þ:
ð1Þ
i¼1
This difference can be decomposed into a part explained by differences in observed characteristics and an unexplained or residual term (Gomulka and Stern, 1990). The former is given by:5 " # " # nD1 nN X X Pˆ N Pˆ D1 ¼ ð1=nN Þ UðYiN a4 ˆ Þ ð1=nD1 Þ UðYiD1 a4 ˆ Þ ð2Þ explained
i¼1
and the unexplained gap is: Pˆ N Pˆ D1
unexplained
"
¼ ð1=nN Þ
i¼1
nN X
UðYiN aˆ N Þ ð1=nN Þ
i¼1
" þ ð1=nD1 Þ
nN X
# UðYiN a4 ˆ Þ
i¼1 nD1 X i¼1
UðYiD1 a4 ˆ Þ ð1=nD1 Þ
nD1 X
# UðYiD1 aˆ D1 Þ
ð3Þ
i¼1
and aˆ * is the coefficient vector that would prevail in the absence of different treatment among the groups. Following DeLeire (2001) the non-discriminatory employment structure is formed by pooling the non-disabled and the non-work limited disabled; this removes the effect of discrimination, but does not impose the same coefficients on the work limited disabled since the unobserved effect of disability on productivity will exist even in the absence of discrimination. Using the method proposed by DeLeire (2001) the true influence of discrimination can be separated from the unobservable influence of health on productivity. The decomposition relies on two assumptions, that the non-work limited disabled have a health problem that does not affect their productivity in work and that discrimination will not vary with the productivity effect of the disability. This enables discrimination to be isolated from unobserved differences in productivity as follows:6 Pˆ N Pˆ D unexplained ¼ discrimination plus unobserved differences in productivity ð4Þ
Pˆ N Pˆ D
Pˆ N Pˆ D
unexplained
unexplained
¼ discrimination
ð5Þ
PˆN PˆD2 unexplained ¼ unobserved differences in productivity
ð6Þ
While it is not possible to test the assumptions directly, the inclusion of a measure of severity of the disability (number of health problems) to proxy productivity is insignificant for the non-work limited disabled but is strongly significant and negative for the work limited disabled, supporting the first 5 Differences in endowments due to pre-labour market discrimination or the anticipation of labour market discrimination are included within the explained part of the model and cannot be separated using this framework. However this only applies to those who were disabled as children. 6 The unobserved effect of productivity may influence the probability of employment through its influence on work preferences and/or hiring by employers.
M.K. Jones / Economics Letters 92 (2006) 32–37
35
Table 1 Decomposition of employment probabilities by disability status 1997 Males Predicted difference Difference due to characteristics Difference in parameters Females Predicted difference Difference due to characteristics Difference in parameters
2003
Work limited
Non-work limited
Work limited
Non-work limited
0.527 0.127 (24%) 0.400 (76%)
0.018 0.010 ( 53%) 0.028 (153%)
0.473 0.101 (21%) 0.372 (79%)
0.023 0.003 (12%) 0.020 (88%)
0.404 0.063 (16%) 0.341 (84%)
0.044 0.001 (2%) 0.044 (98%)
0.372 0.046 (12%) 0.326 (88%)
0.024 0.020 (83%) 0.004 (17%)
Predicted difference was calculated using Eq. (1). Differences in characteristics and parameters are given by Eqs. (2) and (3) respectively.
assumption. If discrimination is positively related to the work limiting nature of the disability the second assumption will not hold. The effect of severity on discrimination cannot be isolated in this framework since it will also influence the unobserved productivity effect.7 However, by assumption the non-work limited disabled have no unobserved productivity difference, therefore decompositions between the type of impairment within this group provide a test for variations in discrimination alone. The unexplained gap in the disability type decompositions are small with the exception of individuals with mental health problems, who have a lower employment rate relative to all other types of health problem that is not explained by differences in observable characteristics, consistent with variations in discrimination.8 If, as this suggests, discrimination is larger for the work limited disabled (6) will overestimate the influence of unobserved productivity differences by the difference in discrimination between the two groups.9 In this situation, the discrimination effect identified in (5) must be interpreted as a lower bound.
3. Results The coefficient estimates from the employment probits are in accordance with expectations and are not presented here.10 Results from the standard decompositions are presented in Table 1. The difference in predicted employment probability between the work limited disabled and the non-disabled is substantial, at about 0.50 for men and 0.40 for women. Over 75% of this difference cannot be explained by differences in characteristics and, if the unobserved productivity difference between the groups were assumed to be zero, this unexplained component would form an upper bound estimate of discrimination. When the non-work limited disabled are considered, the employment gap is near zero, the small negative
7
For example, the unexplained gap from a decomposition within the work limited disabled on the grounds of severity would capture any difference in discrimination but also any difference in productivity. 8 For example, the unexplained component between problems with limbs and mental health is 0.18 or 73% of the overall gap. 9 Individuals with mental health problems are concentrated in the work-limited group (14%) relative to the non-work limited disabled (3%). If there is an additional influence related to the work limiting nature, which cannot be identified here, it is also expected to increase discrimination against the work limited relative to the non-work limited disabled. 10 Results are available from author on request.
36
M.K. Jones / Economics Letters 92 (2006) 32–37
Table 2 DeLeire (2001) decomposition of employment probabilities for work limited disabled Males Predicted difference Difference due to observable characteristics Difference due to unobservable differences in productivity Discrimination Females Predicted difference Difference due to observable characteristics Difference due to unobservable differences in productivity Discrimination
1997
2003
Change
0.527 0.127 (24%) 0.427 (81%) 0.028 ( 5%)
0.473 0.101 (21%) 0.392 (83%) 0.020 ( 4%)
0.054 0.026 0.035 0.008
0.404 0.062 (16%) 0.385 (95%) 0.044 ( 11%)
0.372 0.046 (12%) 0.331 (88%) 0.004 ( 1%)
0.032 0.017 0.054 0.039
Figures relate to the difference between the work limited disabled and the non-disabled. Predicted difference was calculated using Eq. (1). Difference in characteristics is given by Eq. (2). Discrimination is given by Eq. (5) and the unobserved productivity difference is given by Eq. (6).
measure indicating the non-work limited disabled have a slightly higher employment probability than the non-disabled. The greater similarity in the labour market outcomes between the non-work limited disabled and the non-disabled relative to the work limited disabled is consistent with previous evidence from Madden (2004) and DeLeire (2001). Results from the DeLeire (2001) decompositions are presented in Table 2. The discrimination component, albeit a lower bound, is actually negative, indicating the non-work limited disabled receive favourable treatment in the labour market and so the entire unexplained gap from the work limited decomposition is attributed to unobservable productivity differences between the two groups. It is important to note that in the post DDA period the raw employment gap between the work limited disabled and the non-disabled has narrowed, as has the contribution of characteristics and discrimination, but, while falling in absolute terms, the productivity difference still explains the vast majority of the employment gap in 2003. The increase in the employment rate is specific to the work limited disabled and is not explained by a change in characteristics of the group over time. It is therefore consistent with the positive role of the DDA.11
4. Conclusion This study illustrates the potential problems created by ignoring the effect of unobservables in a decomposition analysis. Isolating and quantifying the effect of discrimination against the disabled on employment depends crucially on assumptions made regarding the effect of disability on productivity. If the unobserved productivity difference between the work limited disabled and the non-disabled groups is assumed to be zero, eliminating discrimination would increase employment for the work limited disabled by 37 and 33 percentage points for males and females respectively. However, when the unobserved effect of productivity is controlled for, there is no evidence of employment discrimination against the disabled and policy should therefore focus on increasing the productivity of the disabled. 11
Results from a within group time wise decomposition are also available on request.
M.K. Jones / Economics Letters 92 (2006) 32–37
37
Over time, the gap in employment between the disabled groups has narrowed for both sexes, consistent with a positive effect of the legislation on employment.12 The reduction in the productivity component of the employment gap is consistent with a positive effect from the workplace accommodation component of the DDA. This paper, therefore, adds to the recent evidence of Bell and Heitmueller (2005) in assessing the employment impact of the DDA, although the present evidence is more sanguine concerning the impact of the legislation.
Acknowledgements The author would like to thank Peter Sloane, Paul Latreille, Phil Murphy, David Blackaby and an anonymous referee for useful comments. Material from the Quarterly Labour Force Surveys is Crown Copyright, has been made available from the Office for National Statistics (ONS) through the UK Data Archive and has been used by permission.
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12
It should be noted that other developments in policy for the disabled have occurred over the same period, including the Disabled Person’s Tax Credit and the New Deal for Disabled People. It may also be the case that the disabled are more affected by cyclical changes.