Disability, Reciprocity, and 'Real Efficiency': A Unified Approach

Abstract:     
The Americans with Disabilities Act (ADA) requires private employers to offer reasonable accommodation to disabled persons capable of performing the core elements of a job. Some economists have attacked the statute as ill-advised and inefficient. In examining the efficiency of the ADA, this article analyzes its cost-effectiveness against the following social and legal background conditions: First, society will honor a minimum commitment to provide basic support to persons - including the medically disabled - who, through no fault of their own, cannot earn enough to maintain a minimally decent standard of living. Second, legal and pragmatic factors, including "sticky" or rigid compensation schedules and job classifications, sometimes prevent employers from paying wages that perfectly reflect workers' marginal productivity. Because disabilities sometimes compromise productivity or require costly accommodations, employers may find it difficult to avoid overpaying some disabled employees who "otherwise qualify" for particular jobs.

The article argues that effective enforcement of the ADA under these conditions will often be efficient for society as a whole, but may not be for all employers. That is, the ADA will sometimes create a divergence between private and social benefits. Because the ADA mandates that employers hire and accommodate workers they otherwise would shun as too expensive, the statute avoids the dead-weight loss, generated by imperfections in labor markets, of keeping potentially productive disabled persons in idleness. But because many disabled workers hired under the ADA's commands are likely to be paid "too much," the statute effectively shifts from the public at large to employers the expense of subsidizing disabled workers - including, most notably, those workers whose earnings, if truly reflective of net productivity, would otherwise be too meager to sustain a decent standard of living. In short, the ADA, although good for potentially productive disabled persons and for taxpayers, is potentially unfair to employers. The article examines some implications of these observations for reforming and restructuring the ADA. It also explores the suggestion, which arguably follows from its analysis, that many disabled persons - like other persons who, for reasons unrelated to medical disability, are not productive enough to achieve full economic self-sufficiency - should be regarded as having an obligation, as well as a right, to contribute something to their own support through work.

Keywords: Disability, Americans with Disabilities Act, ADA, ADA and efficiency, ADA and cost-effectiveness, disability and employment

JEL Classifications: J3

Accepted Paper Series