It's a puzzle that is perplexing the economics fraternity. While the expansion of the 1990s boosted jobs and incomes for most Americans, it seems to have bypassed a key group: the nearly 10% of the working-age population with disabilities.
A study by Richard V. Burkhauser and Andrew J. Houtenville of Cornell University and Mary C. Daly of the Federal Reserve Bank of San Francisco tells the story. Despite rising demand for workers, the employment rates of disabled men and women fell steadily from 1989 to 1999 (chart). Further, their household incomes lagged behind the income gains of other households, as earnings declines were only partly offset by higher payments from such programs as Social Security Disability Insurance (DI) and Supplemental Security Income (SSI).
Why hasn't employment of the disabled grown during this expansion, as it did in other cyclical upturns such as that of the 1980s? The question is touching off a hot debate among economists.
Some, such as Massachusetts Institute of Technology economists Daron Acemoglu and Joshua Angrist, believe the Americans With Disabilities Act, (ADA) which took effect in 1992 and was supposed to enhance hiring of the disabled, actually backfired. Their analysis of survey data suggests the costs of accommodating disabled employees--and lawsuits if they are fired--have dissuaded employers from adding disabled workers to their payrolls.
The law's defenders argue that the survey data are flawed. People who are successfully integrated into the workforce, for example, may no longer describe themselves as "disabled" in government surveys--thus lowering the employment estimate for the disabled population. Researchers Douglas Kruse and Lisa Schur of Rutgers University find that employment of people with functional disabilities who did not describe themselves as "work-disabled" rose after the ADA was passed.
Still others stress a sharp rise in people receiving disability payments via Social Security or SSI. In this view, the decline in employer-sponsored health insurance along with relaxed government eligibility standards in the 1990s induced many of the disabled to opt for transfer programs rather than work. Indeed, a study by John Bound and Timothy Waidmann of the University of Michigan attributes much of the drop in disabled employment rates to the growth in government disability insurance rolls.
Of course, it's likely that all of these theories have some validity--that the ADA hurt hiring prospects for some people and helped others, for example, and that many were attracted by the greater availability of government transfer programs. What everyone agrees is that more has to be done to bring the disabled into the world of work and off the government dole.
Thus, hopes are now focused on the new "Ticket to Work" federal law about to go into effect. Under this program, private agencies that successfully train and place the disabled in continuing employment will receive as payment some of the funds they save the government.