Why Are People with Disabilities Underrepresented in the Workforce?

Work is a human need, an essential part of life. We work not just to provide for ourselves and our families, but also to find purpose and meaning. This need is universal; all of us feel it, including people with disabilities. While some disabilities make work difficult or even impossible, many people with disabilities can and want to work. Passed in 1990, the Americans with Disabilities Act (ADA) aimed to enhance opportunities for people with disabilities—not just to give them easier access to buildings and bathrooms, but also to help them gain and maintain employment.

But while considered successful in some areas, such as improving accessibility, the ADA has struggled to eliminate barriers to employment. Currently, only 37.1% of disabled people are employed, less than half the rate of those without disabilities. Why is this the case, and what can we do to change it? The problem lies in the incentives—or, rather, the disincentives—for both employers and disabled individuals themselves.

Disability and Employment

After declining for more than two decades, the employment rate of people with disabilities has picked up in recent years, partly due to the increase in remote work during the COVID pandemic. Still, the current low rate of 37.1% hasn’t changed much from the pre-ADA era. What’s getting in the way of higher employment among the disabled?

First, let’s define what we mean by disability and how it affects employment. The ADA defines a disability as a physical or mental impairment that substantially limits one or more major life activities. Some disabilities are sensory (seeing or hearing), others are ambulatory (walking) and others are cognitive (thinking, which may range from learning disabilities to mental illness). They can be obvious to others (needing a wheelchair) or virtually invisible (chronic pain).

Having a disability doesn’t mean people can’t be successful in the work they do. Countless artists, musicians and politicians have thrived and achieved great success despite their disabilities. Yet for many, disability makes getting or keeping a job challenging, or limits their earnings or the number of hours they work. On average, disabled workers earn just 74% of what nondisabled workers earn. They are more likely to work in lower-paid occupations and to work part-time rather than full-time. For some, the extra difficulty or pain associated with working limits the number of hours they want to work, while others work fewer hours because of the extra time they spend on self-care or family responsibilities.

People with psychiatric or psychological disabilities, like those with well-managed mood disorders, may find it hard to get and keep jobs due to stereotypes and biases that influence employer and coworker expectations. To avoid discrimination, many disabled people conceal their conditions. Before the ADA was amended in 2008, courts often dismissed disability discrimination claims from workers with psychiatric conditions, concluding that those conditions didn’t qualify as disabilities. One aim of the ADA Amendments Act of 2008 was to broaden the coverage of the ADA, making it harder to discriminate based on these conditions.

Limitations of the ADA

Many view the ADA’s passage as a major victory for disability rights, providing disabled people with more legal rights and protections now than ever before. Yet when it comes to employment, things have not worked out as hoped, and the ADA has not had the positive effect it was meant to have. As sometimes happens with well-meaning safety net programs, the ADA, as put into practice, can result in negative incentives—disincentives, rather than incentives—for employers to employ the disabled.

The ADA made it illegal to discriminate against disabled people in employment and required employers to provide reasonable accommodations for disabled employees. But this may be motivating firms to hire fewer disabled workers. Say that a firm that hires a disabled worker and is dissatisfied with that worker’s performance. Even if the employer’s assessment has nothing to do with the employee’s disability, firing that worker may give rise to a discrimination complaint made to the Equal Employment Opportunity Commission, or even a lawsuit. To avoid these risks, firms may avoid the matter entirely by simply shying away from hiring disabled workers. They do so at comparatively little risk: More ADA cases are about unlawful termination than about hiring decisions.

Although some disability rights advocates attribute the ADA’s employment failings to backlash by the courts and the public, that isn’t the best explanation for the continued low labor force participation of disabled people. Rather, the limited impact of the ADA and subsequent amendments is because some of the most significant barriers to employment for disabled people are very expensive and very difficult to address.

The ADA limits employers’ costs of compliance by requiring that they provide only those accommodations that do not impose undue hardship on them and are “job-related.” To be productive employees, however, disabled people might need assistance outside the workplace that is not related to a specific job they might be hired to perform, such as help in getting out of bed and ready for work in the morning, transportation to and from work, or physical or mental rehabilitation of some kind. Although at-home assistance is available in some cases, often from family members, it is usually not covered by health insurance, and out-of-pocket costs are too expensive for most disabled people to afford.

Bad Incentives of Disability Programs

Other government safety net programs that overlap with the ADA (or perhaps compete with it) may produce complexities that reduce the incentive to work. The federal government provides Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) for those who meet the programs’ criteria for disability. SSDI is time- and earnings-tested; a person must have worked a minimum number of years and earned a certain amount before qualifying. SSI, by contrast, is means-tested, with eligibility requiring income and resources below a certain threshold level.

Research evidence suggests that it’s the changes in disability program rules and their administration, rather than changes in beneficiaries’ underlying health, that are responsible for the declining labor force participation rates of disabled people beginning in the 1980s. Between 1980 and 2008, the percentage of working-age people with health and physical limitations that might interfere with their ability to work remained fairly stable at about 8%.

If SSDI recipients earn above a certain threshold, they lose cash benefits and assistance from other programs, such as Medicaid. This may explain why less than a third of SSDI beneficiaries return to work within 10 years of enrollment, and fewer than 5% of those beneficiaries earn enough to have their benefits terminated. Although the government allows workers to continue to collect benefits for up to a nine-month trial period after their income exceeds a threshold level ($1,550 per month in 2024 for most individuals) and provides “expedited reinstatement” for people who are denied benefits for earning too much, many are hesitant to give up their benefits to take jobs out of fear that they won’t be able to qualify again for SSDI in the future, or will lose Medicaid or Medicare benefits.

Potential Public- and Private-Sector Reforms

Despite problems with the ADA and Social Security disability programs, the federal government has long played a role in helping disabled people through vocational rehabilitation—that is, helping these individuals find work that is suited to their talents, strengths and limitations. However, government disability spending on vocational rehabilitation is minimal compared to its spending on healthcare and income maintenance.

Nongovernmental organizations, either privately or on behalf of the state, have traditionally helped fill the gap. Some run sheltered workshops, offering disabled people a mix of treatment, training and work, often piecework or single-assembly tasks. But although they were once common, sheltered workshops have been declining in influence since the 1990s, criticized for segregating disabled workers from the rest of the workforce and often paying low wages. Few of those who participate in sheltered workshops transition to stable jobs in the integrated labor market. Oregon, for one, has phased out sheltered workshops, and several other states are following its example.

A more promising alternative approach to vocational rehabilitation for people with severe disabilities is supported employment. With this approach, job placement occurs first, followed by intensive skills training and continuing support. Since the 1980s, relative wages for supported employees have risen while those for sheltered employees have fallen, and evidence reveals that supported employment is more cost-effective. But adoption of supported employment programs has been limited because of inadequate government funding.

Reforms that reduce disincentives to work could improve workforce participation for people with disabilities. To increase firms’ willingness to hire disabled workers, the ADA could specify a cap on the costs an employer would be required to bear, reducing or avoiding any ambiguity about how much accommodating a given worker would cost. For instances in which costs of accommodation exceed the cap, the government could provide subsidies.

But, as noted above, many disabled people need more than job-related accommodations to work, and there’s a limit to what employers and government can afford to provide. Private-sector innovation could leverage charitable resources and financial capital to invest in these additional needs, potentially reducing government spending on SSDI, SSI and other programs.

The generosity of disability benefit programs combined with their complexity means that some people choose to work fewer hours than they might so they can qualify for and collect disability benefits. Past efforts to make it harder to qualify for disability benefits provoked political backlash. Congress could revise the benefits formula by increasing threshold income levels and reducing the rate at which cash and in-kind benefits are phased out with income. But this step, though improving incentives, could result in increased government spending on these programs, and many in Congress want spending constrained to reduce unsustainable deficits.

A better approach may be to emphasize employment support services earlier in the application process for disability benefits so that those services are available to all applicants. The current model offers employment services to those who are granted SSDI or SSI benefits but not to applicants who are denied benefits. Providing employment services before benefit eligibility is determined could be combined with “experience rating” of SSDI, a kind of evaluation already used with workers’ compensation and unemployment insurance programs. Experience rating means that employers with a greater percentage of workers who move onto the SSDI program would be required to pay higher per-worker taxes. This would give employers more incentive to invest in accommodation and rehabilitation for their disabled workers.

The Americans with Disabilities Act was a great success—except where it wasn’t. It’s had little or no positive effect on the employment rates of disabled people, and SSDI and SSI continue to reduce the incentives for people with disabilities to work. Reforms to these programs could help more disabled people participate in the labor force. But substantial improvement in the numbers of disabled people inside the workplace would require increased efforts to assist disabled people outside the workplace.

There is no easy way to eliminate all the obstacles that limit disabled employment, but a combination of policy reforms, economic growth and private-sector initiatives could contribute to more jobs and higher wages for disabled people.