Economic and Employment Prospects of the Disabled

by Therese Brown

This article first appeared in the summer 1997 issue of the Expert Witness.

Most research concerning the effects of disability on earnings and employment uses cross-sectional data — that is, data which are collected for a large group of individuals at one time. The impact which an injury incurred this year will have in ten years time is inferred by comparing the status of individuals who have recently been injured with the equivalent status of those who incurred their injuries ten years ago.

This approach suffers from two serious drawbacks. First,
those who are injured today may differ in many significant ways from those who were injured ten years ago. Second, it is difficult to use cross-sectional data to determine the “life courses” of individuals. For example, assume that it has been observed that the unemployment rate of those who suffered a particular type of injury in the past is consistently 20 percent regardless of how many intervening years have passed. Does that mean that 20 percent of those with that type of injury have been unemployed for 100 percent of the time? That
100 percent of the individuals have each been unemployed for 20 percent of each year? Or some position in between?

One possible way of dealing with these problems would be to rely on panel data — that is, data from studies
which “follow” individuals for a number of years. For example, some of the issues identified above could be resolved if disabled individuals could be followed for a number of years after their accidents had occurred.

One study which uses this type of data (from the United States) is “Employment and Economic Well-Being Following the Onset of a Disability” by Richard Burkhauser and Mary Daly. In the interests of providing an all-encompassing perspective, the authors define disability in a broad sense, allowing them to include individuals who have been integrated into the workforce. Further, their analysis considers only those who report a physical or nervous condition that has limited their work capability for at least two consecutive years.

The authors estimate the prevalence of disability among individuals between the ages of 25 and 61 — prime working ages — to be 9.2 percent for males and 10.6 percent for females. Results from their multi-period analysis of these individuals suggest that the onset of disability is not accompanied by a dramatic reduction in economic well-being
(especially once government income is included) — a considerably different finding from that reported by other studies utilising cross-sectional data.

Particularly interesting for our purposes are their estimations of the cumulative risk that disabled persons will experience particular events. Their sample population is aggregated into a younger group of 25 to 50 year olds and an older group of 51 to 61 year olds. Their results indicate that
15 percent of the younger group and 24 percent of the older group had stopped working for at least one full year, one year after experiencing the disabling condition. After five years,
44 percent and 53 percent of the younger and older group, respectively, had experienced at least one year of no work. For those in the younger group who stopped working for a year, many subsequently returned to work. After one year, 28 percent of this group had returned to work, and by five years the majority
(61 percent) had returned to work. Fewer of the older group had resumed employment, with only 14 percent after one year and 28 percent after five years. In terms of economic well-being, in both the younger and older groups, 46 percent earned an income that was at least equivalent to their pre-accident income after one year, with the majority reaching their pre-disability income after 2 years. At a five-year point following the onset of the disability, 84 percent in the younger group and 75 percent in the older group had returned to a level of household income that was at least equivalent to their pre-onset income.

The authors point out that poverty is not unknown to many people who report disabling experiences, as within a five year period 22 percent of this population had fallen into poverty for at least one year. They suggest, however, that the loss of income experienced by disabled individuals is less notable on average than might be expected. Their analysis also suggests that older workers are likely to be more negatively affected by their disabling condition than are their younger counterparts, in terms of reintegration into the workforce and restoration to their pre-onset economic position. The authors indicate that government transfer payments have a larger role in the income recovery of disabled individuals than does the recovery of their health, as the experience of health recovery is relatively rare. They also conclude that there is a longer time period than was previously expected between the time that an individual becomes disabled and the time they exit from the labour market or enter the disability or retirement rolls.


From 1996 through February 1998, Therese Brown was a consultant at Economica.