Originally published here.

The economic analysis of disabled workers with respect to the labour market has been surprisingly neglected in the UK, especially given the numerical size of this group sing the 2001 Labour Force Survey (LFS) Smith and Twomey (2002) note that nearly one in five people of working age had a current long term disability in the UK; this amounts to some 3.7 million men and 3.4 million women. As the European Foundation (2003) notes, although cultural factors may operate both across and within countries to influence the incidence of reported disability, only Finland has a higher percentage of the working age population reporting chronic illness or disability than the UK. The contrast in labour market outcomes for disabled and non-disabled persons is stark: the employment rate for the disabled is just 48%, compared to a rate of 81% for the non-disabled, while for those disabled people in employment, average earnings are substantially lower than for their non-disabled counterparts.

The above figures are especially striking when considered in the context of legislative and other reforms over the last few years aimed at securing improvements in the labour market position of disabled individuals. The major legal change in this regard was the passing of the Disability Discrimination Act (DDA) in 1995, which was designed to protect the disabled against discrimination and to facilitate and enhance their access to employment by imposing obligations on employers (with 15 or more employees) to make reasonable adjustment to their premises and/or employment arrangements . In addition, a Disability Rights Commission provides advice and information, supports disabled persons in securing their rights under the DDA, and campaigns on behalf of this group. The Government has also improved incentives to work via the tax and benefit system and more particularly through the Disabled Person’s Tax Credit, while the New Deal for Disabled People (NDPP) introduced in July 2001 further attempts to help those out of employment to get back into work. This last policy measure is a voluntary programme whereby disabled people have access to a network of Jobs Brokers whose role is essentially to provide advice about the local labour market and to support individuals in finding and retaining work.

In this paper, while recognising the difficulties in identifying the impact of disability on labour market outcomes, we compare the effect of disability by gender. The evidence suggests that substantial differences in both likelihood of employment and levels of earnings remain, even after several years of operation of the Disability Discrimination Act. Significant heterogeneity within the disabled group is also identified, with the type of health problem having an important influence on employment and earnings. As with ethnicity, it becomes important to differentiate between the sub-groups to identify those who face the greatest labour market disadvantage. The evidence suggests that those suffering from mental health forms of disability fare particularly badly, and indicates that future efforts may need to be directed towards assisting this particulargroup. Although our data do not allow us to investigate the reasons for the particularly extreme degree of disadvantage faced by this group, it would be surprising if at least part of this did not result from some form of discrimination (and most notably for those (re) joining the labour market).

As such, part of the answer may reside in improving employers’ access to information concerning the various types of mental illness and their implications for work. It may also be helpful to emphasise the ‘reasonable adjustments’ that can be made for workers with this type of disability; the popular conception of such adjustments perhaps being more with physical environment.  Our wage decompositions suggest the ‘penalty’ for disability is greater for women than for men, consistent with the presence of discrimination, although we must note that it is possible that our controls for productivity differences may be imperfect. Finally, we find little evidence using the Baldwin and Johnson (1992) methodology that the employment effects associated with discrimination in wages against the disabled are substantial. However, there is a suggestion that the male disabled may be becoming more sensitive to earnings than in the period prior to the implementation of the DDA.

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