«HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS IDENTIFIYING THE EFFECTS OF THE AMERICANS WITH DISABILITIES ACT USING STATE-LAW ...»
JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS
IDENTIFIYING THE EFFECTS OF THE
AMERICANS WITH DISABILITIES ACT
USING STATE-LAW VARIATION:
PRELIMINARY EVIDENCE ON
EDUCATIONAL PARTICIPATION EFFECTSChristine Jolls Discussion Paper No. 497 09/2004 Harvard Law School Cambridge, MA 02138
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Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation:
Preliminary Evidence on Educational Participation Effects Christine Jolls∗ Abstract The Americans with Disabilities Act of 1990 (ADA) broadly prohibits discrimination on the basis of disability in employment and other settings. Several empirical studies have suggested that employment levels of individuals with disabilities declined rather than increased after the ADA's passage. This paper provides a first look at whether lower disabled employment levels after the ADA might have resulted from increased participation in educational opportunities by individuals with disabilities as a rational response to the ADA's employment protections. The main empirical finding is that individuals with disabilities who were not employed in the years following legal innovation in the form of the ADA were more likely than their pre-ADA counterparts to give educational participation as their reason for not being employed. This preliminary evidence suggests the value of further study, with better education data, of the relationship between the ADA's enactment and disabled participation in educational opportunities.
∗ Harvard Law School and NBER, Cambridge, MA 02138. Thanks to Krishna Rao for outstanding research assistance and to Bert Huang, Jeffrey Liebman, and Jasmin Sethi for extremely helpful discussions. Special thanks for his many important contributions to J.J.
Prescott, my collaborator on the broader project of which this paper is a part.
Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation:
Preliminary Evidence on Educational Participation Effects Christine Jolls © 2004 Christine Jolls. All rights reserved.
Congress passed the Americans with Disabilities Act of 1990 (ADA) with an unusual degree of political consensus and popular support. The ADA broadly prohibits discrimination on the basis of disability in employment and other settings. Given the breadth of the political support for the ADA, it was quite unexpected to find early evidence that the law actually worsened rather than improved employment prospects for individuals with disabilities (A.M.
Subsequent papers have closely examined the question of the employment effects of the ADA, reaching varying conclusions. Thomas DeLeire (2000) and Daron Acemoglu and Joshua Angrist (2001) – some of the earliest papers in what has become a substantial literature – offer significant evidence of disabled employment declines resulting from the ADA’s enactment.
Other authors, however, have questioned whether the decline in disabled employment in the years following the ADA’s enactment is actually a consequence of the law or whether instead the decline resulted from other contemporaneous factors such as changes in federal disability benefits levels or changes in health status (e.g., John Bound and Timothy Waidmann 2000;
Douglas Kruse and Lisa Schur 2003).
Variation in state-level employment discrimination regimes for individuals with disabilities in the period before the ADA’s enactment provides a helpful means of cutting through the existing thicket and identifying more credibly the effects of the ADA on outcomes – in terms of both employment and (my focus here) educational participation – for individuals with disabilities. Prior to the ADA’s enactment, some states had employment discrimination regimes that closely mirrored the ADA in both requiring employers to avoid disability-based discrimination in hiring, firing, and terms and conditions of employment and requiring employers to provide “reasonable accommodations” – such as assistive technology or changes in workplace structures – to individuals with disabilities (see Table 1, column 1). Another group of states tracked the ADA in prohibiting disability-based discrimination in hiring, firing, and terms and conditions of employment, but did not require reasonable accommodations (Table 1, columns 2 and 3). A third group imposed no limits whatever on the treatment of disabled employees in the pre-ADA period (Table 1, column 3). With respect to the ADA’s employment effects, this state-law variation permits inquiry into the relationship between the impact of the ADA’s employment discrimination provisions on disabled employment and the degree to which these provisions were actually a legal innovation in a given state. If disabled employment effects are significantly correlated with the degree to which the employment discrimination provisions of the ADA were an innovation in a given state, then non-ADA changes around the time of the ADA’s passage – such as changes federal disability benefits or health status – may not be the best explanations for declining disabled employment after the ADA.1 In fact the degree to which the ADA’s employment discrimination provisions were an innovation relative to pre-ADA state law is closely connected to the degree to which disabled employment declined just after the ADA’s passage (Christine Jolls and J.J. Prescott 2004). In particular, while relative disabled employment declined significantly just after the ADA’s enactment in states in which these provisions were a substantial innovation relative to the preADA state-level employment discrimination regime, relative disabled employment was stable in states with ADA-like employment discrimination regimes in place prior to the ADA’s enactment. The innovation-related employment declines identified by the state-law variation, however, were concentrated in the initial years after the ADA’s enactment. This finding about the timing of the ADA’s employment effects suggests the empirical plausibility of the potential
explanation offered by Jolls (2000:280) for disabled employment declines after the ADA:
disabled individuals in states in which the ADA’s employment discrimination provisions were a substantial innovation relative to pre-ADA state law may have temporarily reduced their labor supply because these provisions, by raising the returns to education for individuals with disabilities in those states, encouraged such individuals to invest in education.
This paper provides preliminary evidence on the possibility that the ADA increased participation in educational opportunities by individuals with disabilities in states in which the ADA’s employment discrimination provisions were a substantial innovation compared to states in which they were not. As in the context of the ADA’s employment effects, examining the ADA’s impact on disabled educational participation against the backdrop of states with preexisting ADA-like employment discrimination regimes helps to control for general changes in incentives for disabled educational participation that may have occurred contemporaneously with the ADA’s enactment. A limited review of evidence from the Current Population Survey (CPS) provides qualified support for the idea that movement in disabled educational participation after the ADA’s enactment was positively correlated with the degree to which the ADA’s employment discrimination provisions were a substantial innovation relative to pre-ADA state law.
I. Educational Investment and the Labor Market In a conventional labor market in which the typical worker is demanded and paid in accordance with the worker’s marginal revenue product of labor, taste-based discrimination against a group of workers – such as individuals with disabilities – reduces this group’s wage below the group’s marginal revenue product of labor and also depresses the group’s employment level (John Donohue 1986:1415-1418).2 Empirically, Marjorie Baldwin and William Johnson (1994) offer evidence of large discrimination-induced wage and employment gaps between disabled and nondisabled workers. Within this framework, the effect of an employment discrimination law such as the ADA – assuming the law is fully enforceable – is to align the wages and employment levels of the disadvantaged group with those of the advantaged group (see Jolls 2000:243-51; Jolls 2001:693-94).
The implications of this analysis for disabled workers’ educational decisions are fairly straightforward. Human capital theory suggests that decisions about educational investment are likely to be driven at least in part by the labor market returns to such investment. Because employment discrimination law in the above analysis increases both the wages and the employment levels of disadvantaged workers, it increases the returns to educational investment by this group. Thus, the enactment of an employment discrimination law should increase educational participation by members of the disadvantaged group. In the context of the ADA, the new regime should increase educational participation by individuals with disabilities in the states in which the ADA’s employment discrimination provisions were an innovation compared to states in which they were not.
As is true in many areas of legal regulation (e.g., David Autor, John Donohue and Stewart Schwab 2003), state-level employment discrimination regimes for individuals with disabilities in the pre-ADA period consisted of a mix of statutory and judicial law. Judicial opinions turn out to be an important source in understanding the pre-ADA state-level employment discrimination regimes because a number of states imposed obligations by judicial decision rather than by statutory provision, and because in some cases judicial opinions substantially clarified the meaning of an ambiguous statutory framework. The state groupings used in this paper reflect not only statutory law but also all pre-ADA case law available in the Westlaw legal database. I refer to states in which the pre-ADA state-level regime mirrored the ADA’s employment discrimination provisions (column 1 of Table 1) as the “control” states; to states in which the pre-ADA state-level regime contained more limited regulation of the treatment of disabled employees (columns 2 and 3 of Table 1) as the “limited protection” states;
and to states in which the pre-ADA state-level regime imposed no limits whatever on the treatment of disabled employees (column 4 of Table 1) as the “no protection” states.
For the disability status of individuals as well as most other demographic and economic variables used below, I rely on the March CPS.3 The dependent variable of interest in the present work is participation in educational opportunities. I measure educational participation using responses to the CPS question about whether the reason a respondent was not working in the observation year was the pursuit of educational opportunities.4 Although there are various other educational participation questions in the CPS, this question seems best suited for examining the hypothesis that ADA-driven innovation relative to pre-ADA state-level employment discrimination law produced a short-run decline in disabled employment because of the positive effect of such innovation on disabled educational investment incentives.
III. Disabled Educational Participation Before and After the ADA Table 2 presents basic statistics on the mean proportion of individuals who give educational participation as the reason for not being employed for disabled versus nondisabled individuals, before and after the ADA, across the three state groups from Table 1. While common practice in examining the effects of a changed legal regime is to examine two-year windows before and after the change (e.g., Jonathan Gruber 1994; Autor, Donohue and Schwab 2002), the fact that there are only three states in one of the state groups here – the no-protection group – means that the number of individuals who both identify as disabled in the CPS and give educational participation as their reason for not being employed in any given year is often extremely small (less than five) in this state group. Thus, sensible examination of the ADA’s effects across the three state groups required the use of longer time windows. The empirical analysis uses data from 1987, the first observation year for which disability status is available in the CPS, through 1997, five years after the first year in which the ADA was in effect.
While the ADA went into effect in 1992, it was passed in June of 1990, and from the perspective of examining educational investment prompted by ADA-driven innovation in the legal treatment of employment discrimination the relevant “start date” is the date on which the ADA would have been viewed as a reliable basis on which to make decisions about education.
Therefore, Table 2 treats the period from 1987 through 1990 as the pre-ADA period and the period from 1991 to 1997 as the post-ADA period.