Do Workers with Disabilities Help Sustain the Economy Through a Downturn?

By Kristen Faye Bean, MSW Although many sustainability concerns concentrate on environmental issues, the United States’ (U.S.) economic downturn that began in December 2007 highlights issues of economic sustainability. The entire U.S. economy is struggling to sustain the power that it has upheld in the world economy. Businesses worry about maintaining profits with minimal costs, and employees are concerned about job sustainability. Employers have begun to focus on aspects of their business that are more robust to economic downturn. The layoffs since December 2007 have been distributed among many different industries; the third quarter of 2009 showed that manufacturing firms, construction, professional and technical services, and management of companies and enterprises had experienced mass layoffs (Bureau of Labor Statistics, 2009). Because of the relatively equal distribution of layoffs, it is unclear what types of employees businesses are relying on to sustain profits with minimal costs.  This paper explores whether employees with disabilities are an integral labor market for businesses during weak economic periods.

The economic theory of inferior goods explains that in order to save money, consumers purchase cheaper goods more often, and businesses employ cheaper labor with fewer benefits (Krugman & Wells, 2005). This theory predicts that low wage workers provide sustainable labor sources for businesses during an economic downturn.

People with disabilities tend to be stable, low- wage workers in the U.S. These people usually have income from supplemental security income (SSI) payments and health insurance from Medicaid. Therefore, they often work low-wage jobs that are temporary contracts, piece rate, and without other benefits such as health insurance. In order to maintain their SSI payments and Medicaid, people with disabilities must not earn more than the Substantial Gainful Activity—a federal cap on monthly income for those enrolled in the SSI program. The Substantial Gainful Activity in 2010 for a blind, disabled person is $1640 USD and for a non-blind, disabled person it is $1000 USD. (Social Security Administration, 2009). People with disabilities provide a stable, low- wage worker population due to their desire to maintain their federal disability benefits.

Little is known about how changes in the U.S. economy impact the labor market for people with disabilities. People with disabilities have increasingly joined the labor market in the last few decades since the deinstitutionalization in the 1970s of many people with physical and mental disabilities. The most recent financial depression has been the first significant economic crisis testing this labor market since the deinstitutionalization movement, thus providing an opportunity to analyze the stability and economic impacts of this particular labor market during an economic downturn.

The one-year estimates from the American Community Survey (ACS) of 2007 and 2008 were used to evaluate whether or not people with disabilities sustained employment after the economic downturn hit in December 2007. The ACS is an annual government-funded survey of a random sample of the U.S. population. Among other information, the ACS collects data on the incomes of people with and without disabilities. As previously noted, the theory of inferior goods predicts that people with disabilities would be employed more during a weak economy. The following research questions were statistically tested to assess the levels of employment of people with disabilities during the current economic downturn:

  • Was the income of people with disabilities in 2007 less than the income of people with disabilities in 2008?
  • Does the income gap between people with and without disabilities decrease between 2007 and 2008?

The ACS data was collected and combined between January and December of each year. The ACS defines disability as "the restriction in participation that results from a lack of fit between the individual’s functional limitations and the characteristics of the physical and social environment." The 2007 survey asked participants if they experienced the following disabilities: sensory, physical, cognitive, or self-care disabilities. The 2008 survey asked participants if they experienced hearing, vision, cognitive, ambulatory, and self-care disabilities. The measure used in this study separated participants into groups of people experiencing any disability and people not experiencing a disability. Income status was defined equally in the 2007 and 2008 ACS surveys. Income was defined by wage income, which was "total money earnings received for work performed as an employee during the past 12 months." The wage income is separate from other sources of income, such as SSI payments. A change in wage income would reflect a change in income based on employment.

All participants were divided into one of two categories: disability or no disability. Participants self-reported income as the amount of money that they made by work in the past 12 months. The total sample of 123,060 participants in 2007 and 2008 were aged 15 and older. The sample did not include institutionalized people with and without disabilities in the U.S.

Data Analysis

Data were analyzed using the statistical software, SPSS 18.0 (SPSS, 2009). Independent samples t-tests, which are used to analyze whether or not the average of two different groups are different, were conducted to test the hypotheses. Raw data were used to assess the equivalency of average income among people with and without disabilities. The wage gap between people with and without disabilities in 2007 and 2008 was calculated by finding the difference between the income of each person with and without a disability. Because of many missing data points on income, the missing data of wage gaps were imputed statistically using series mean, which replaces the missing values with the wage gap sample mean. The equivalency of means of the two new samples of wage gap in 2007 and wage gap in 2008 were used to perform an independent samples t-test.

Results

The mean wage of people with disabilities was $7,510 in 2007 and $8,340 in 2008. The independent samples t-test determined that there was a significant difference between the wage of people with disabilities in 2007 and 2008. On average, incomes of people with disabilities increased by $830 between 2007 and 2008. Even though an $830 wage raise might seem like a minute increase, it would be a substantial increase for a person that might be working a part-time, temporary, or piece rate job. An independent samples t-test was conducted on the mean wage of people without disabilities in 2007 and 2008 in order to see if this increase in income in 2008 was unique to people with disabilities. The mean wage of people without disabilities was $27,073 in 2007 and $27,412 in 2008. There was a significant difference between the income of people without disabilities between 2007 and 2008. On average, incomes of people without disabilities increased by $339 between 2007 and 2008.  On average, the ACS data shows that people with disabilities’ income increased by $500 more than that of people without disabilities between 2007 and 2008.

The data on income of people with and without disabilities shows that the income of people with disabilities increased significantly more in 2008 than people without disabilities’ income. The independent samples t-test determined that there was a significant decrease in the income gap of people with and without disabilities between 2007 and 2008.

Discussion

People with disabilities have increased their income from employment after the economic downturn occurred. The decrease in the income gap between people with and without disabilities showed that people without disabilities did not experience a significant income gain from employment, while people with disabilities did experience a significant income gain from employment during the weak economy. This study shows that people with disabilities have had more stable employment in an economic downturn than people without disabilities.

The increase in wage income of people with disabilities implies that they have received new employment opportunities to increase their income. People with disabilities benefit employers during an economic downturn by contributing to the labor market as stable, low-income employees who do not need additional benefits. People with disabilities can provide sustained low-wage employment during a weak economy, but the future will show if employers will maintain the increased employment opportunities for people with disabilities during a strong economy. Future research should explore where people with disabilities are employed in the economic downturn in order to find out which industries are benefitting from the employment of people with disabilities.

References

Bureau of Labor Statistics. (2009). Extended mass layoffs- third quarter summary.  Economic News Release. Retrieved on January 12, 2009 at: http://www.bls.gov/news.release/mslo.nr0.htm

Krugman, P. & Wells, R. (2005). Microeconomics. New York, NY: Worth Publishers.

Nichols, M. (2008). People with disabilities in the U.S. labor market. Citizen Economists. Retrieved on November 15, 2009 at: http://www.citizeneconomists.com/blogs/2008/09/03/people-with-disabilities-in-the-us-labor-market/

Pagan, R. (2006). Is part-time work a good or bad opportunity for people with disabilities? A European analysis. Disability and Rehabilitation, 29(24), 1910-1919.

Rigg, J. (2005). Labour market disadvantage amongst disabled people: a longitudinal perspective. Centre for Analysis of Exclusion, LSE, CASE Papers.

Social Security Administration. (2009). Substantial Gainful Activity. Automatic Increases. Retrieved on January 12, 2009 at: http://www.ssa.gov/OACT/COLA/sga.html

SPSS, Inc. (2009). SPSS 18.0 [computer software]. Chicago: Author.

Contributor's Biography:

Kristen Bean is a PhD student at the School of Social Work at Arizona State University. She received her Masters of Social Service Administration and Certification of Health Administration and Policy from University of Chicago. Kristen Bean researches physical, developmental, and mental disabilities. Kristen Bean is currently a research assistant at the Southwest Interdisciplinary Research Center.

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