Returns to Human Capital and Hourly Earnings of Men with Disabilities: Evidence Across the Distribution of Wages, 1988 - 2005

Researchers and policy makers have long been concerned with the earnings disadvantage of workers with disabilities. This paper examines the wage disparity as a manifestation of returns to workers’ human capital. To the extent that disability measures a physical condition that places constraints on workers’ productivity, it should be more disruptive in occupations that require physical ability or exertion and less in those that demand cognitive or technical skills. It is well documented that, in the 1980’s, the demand for labor began to shift rapidly in favor of occupations that rely on skill biased technologies. The central proposition in this paper, referred to as the human capital hypothesis, is that workers whose skills place them in the lowest range of the wage distribution tend to possess the smallest endowments of technology-using skill, and hence experience the largest shortfall in wages. Estimates of a model of hourly earnings, using quantile regression and based on samples of males from the Current Population Survey for 1988 through 2005, offer support for the human capital hypothesis.