ABSTRACT
Substantial evidence exists that a lower proportion of disabled people is employed than non-disabled people (DeLeire, 2001; Jones et al., 2003; Hum and Simpson, 1996), but there are different potential reasons why this may be the case. The interaction between disability and labour participation can be rationalized along the lines of disability affecting both the supply of labour and the demand for labour (Madden, 2004; Mitra and Sambamoorthi, 2008). All these thoughts take place in the standard labour leisure choice model which assumes that workers and employers are rational. On the supply side, this model assumes that each worker has limited hours to allocate to labour and leisure to maximize his utility under constraints of income. Given this, people decide to work if the offered salary is above the reservation wage which depends on each worker’s non-labour incomes and his utility function (Cahuc and Zylberberg, 1996).2 Disability can affect participation via the raising of the reservation wage due, first, to unearned income coming from disabled-related transfers. This is easy to understand as, in general, individuals with disabilities have a greater propensity to receive transfers from charitable
organizations, their relatives or from the state as a disability pension. These transfers would be the cause of differences in labour market participation (Jones et al., 2003; Madden, 2004; Mitra, 2009). Second, PWDs will experience a higher cost of working given that greater efforts may be needed compared to persons without disabilities to get to the workplace and do the work (Mittra and Sambamoorthi, 2008). This will decrease the opportunity cost of leisure and thus indirectly increase the reservation wage (Jones et al., 2003) which may be greater than the prevailing wage. Finally, some disabled individuals will prefer leisure to work. The reservation wage is also a function of some personal characteristics, like education or experience, which can be negatively affected by the disability, given the fact that the disability can be a long term health problem. However it is also possible that impairment affects the job search process and explains the unemployment duration differential between the two groups. Given that in the job search model the search effort increases with the health state (Zamo, 2007), disability – or ill health in general – will reduce the intensity of search and thus increase unemployment duration for PWDs. This length of time will be further prolonged, given that disabled people cannot do every kind of work on offer. The supply side explanations of the employment gap have been confirmed by Hum and Simpson (1996) who found that in Canada the wage gap between disabled and non-disabled men is entirely explained by differences in observable characteristics. Concerning the gap between women, they found that it is explained 92 per cent of the time by observable characteristics. In the same vein, DeLeire (2001) shows that the characteristics of labour supply explained 92 per cent of the wage gap between people with and without disabilities in the US. Madden (2004) and Johnson and Lambrinos (1985), for their part, estimate respectively that this component explains 70 per cent of the employment gap and 70 per cent of the pay gap in the UK. As for Longhi et al. (2010), they found that differences in productive capacities explain almost the entire pay differential between disabled and non-disabled people in the UK, but not the difference for the disabled by virtue of a mental health condition. It is also possible that disability may affect labour market outcomes via the demand for labour. Two aspects can be quoted here. First, PWDs may be offered a lower wage due to lower productivity, and these lower wages offered may also contribute to lower employment rates. A person’s human capital is affected by poor health; especially, disabled people can experience lower productivity if the workplace environment is not accommodating. Thus, if they are reattributed at their marginal product of labour, the PWDs may be offered a lower market wage, leading some to prefer leisure (wage offered became less than the reservation wage). However, all disabilities are not always a source of lower productivity, depending on the type of disability, type of employment and development of the work environment (see Winance, 2008) and discrimination can also take place. The second factor on the demand side is discrimination. Economists define discrimination as a situation where two groups of workers with equal average productivity have different average wages or opportunities for employment
(Baldwin and Johnson, 2001). Discrimination can occur when an employer is prejudiced against certain groups of workers – taste or pure discrimination (Becker, 1971) – or because of differential information about the average productivity of persons with and without disabilities – statistical discrimination (Mitra and Sambamoorthi, 2008; Arrow, 1971; Phelps, 1972; Aigner and Cain, 1977). Many authors have attempted to measure this. Like Mitra and Sambamoorthi (2008) who found that the total differential of employment between men with disabilities and without disabilities in India is explained by discrimination. Kidd et al. (2000) in the UK and Baldwin and Johnson (2005) in the US found that discrimination has between 30 and 60 per cent in earnings differences. Nevertheless, one core difficulty of all these works resides in the measurement of disability itself.
