Consequences of the Americans With Disabilities Act

...employment rates for disabled men in all age categories, and disabled women under the age of 40, fell sharply after the ADA. This decline represents a clear break from past trends for both disabled and non-disabled workers, and therefore seems likely to have been caused by the ADA.

In Consequences of Employment Protection? The Case of The Americans With Disabilities Act (NBER Working Paper No. 6670) , co-authors Daron Acemoglu and Joshua Angrist ask whether the ADA accomplishes its mission of increasing employment and retention of the disabled, while keeping wages on par with non-disabled employees, and whether the ADA adversely affects employment of the non-disabled, as early critics of the Act predicted it would. Finally, they inquire, has the ADA resulted in employer costs high enough to reduce the overall level of employment for all workers?

The ADA, which went into effect in 1992, prohibits discrimination on the basis of disability in hiring, wage determination, and firing, and requires that employers offer reasonable accommodations to disabled workers, such as wheelchair access. A Presidential committee estimates that the average employer paid $930 per worker accommodation since the law took effect. Critics of the ADA worried about the employment consequences of these costs and the possible costs arising from litigation to enforce ADA employment provisions.

The Equal Opportunity Employment Commission (EEOC), the agency charged with enforcement of the ADA, received more than 90,000 discrimination complaints between 1992 and 1997. Approximately 29 percent of these charges were for failure to provide adequate accommodations, 10 percent for hiring violations, and nearly 63 percent for wrongful termination. Since July 1992, employers have paid more than $174 million in EEOC settlements over ADA complaints, not counting administrative costs and legal fees. The threat and actual pursuit of litigation has also spurred the development of the Employment Practices Liability Insurance (EPLI) market.

Using data from the Current Population surveys for 1988-97, the authors find that the ADA had no effect on the wages of disabled workers, which are still approximately 40 percent below those of the non-disabled. On the other hand, employment rates for disabled men in all age categories, and disabled women under the age of 40, fell sharply after the ADA. This decline represents a clear break from past trends for both disabled and non-disabled workers, and therefore seems likely to have been caused by the ADA. Additional evidence for this claim is the finding that mid-sized companies show the most pronounced decrease in hiring the disabled. Large companies probably have sufficient resources to absorb compliance costs, according to the authors, while small companies are exempt from the ADA requirements. Also, in states with large numbers of ADA-related discrimination cases in previous years, fewer disabled people are hired afterwards. This too suggests that concern about costs from ADA provisions may have been driving the decline in disabled employment.

Although there appear to have been affects on the disabled, there is no evidence the ADA affect the hiring or employment of non-disabled workers, suggesting that its unintended negative effects are confined to the protected group.

The authors' findings regarding the ADA's negative effects on employment of the disabled take into account employment trends, composition effects, and changes in Supplemental Security Income (SSI) and Disability Insurance (DI) participation. Controlling for these variables is critical, since one of the by-products of the societal attention to disabled persons has been that there is less social stigma attached to claims of disability. And disability claims under SSI and DI did increase sharply over the study period.

The ADA has served as a battleground for competing ideologies. Some critics of the Act see it as threatening employment-at-will and making the U.S. labor market more like Europe's. ADA proponents see the Act as creating a more inclusive labor market, without increasing employer costs or reducing overall employment. The authors show that while the evidence for negative effects of the ADA on disabled employment levels is broadly consistent, the negative effects seems to work through reduced hiring, with little evidence of an impact on job loss. This finding is consistent with a view that disabled worker accommodation costs have been higher than the employment-protection costs of litigation for wrongful termination.

-- Les Picker