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Disabled People’s Financial Histories: Uncovering the disability wealth-penalty

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  • Abigail McKnight

Abstract

It is well established that on average disabled people and the households in which they live face greater financial disadvantage in terms of income than their counterparts. What is less well understood is how they fare in terms of their wealth status. In this paper we use data from two large scale social surveys to examine the relationship between disability status and household wealth holdings. We find that overall disabled people have substantially lower household wealth and all components of wealth (property, financial, pension, physical) than non-disabled people but even these average differences mask important lifecycle patterns. The incidence of disability increases with age and the effect of this is that disabled people are on average older than non-disabled people. As wealth accumulation also increases with age up to retirement the effect is that average differences understate the true disability wealth-penalty. People who experience disability later in life have been in a stronger position to accumulate assets over their working lives than people who experience disability over the crucial wealth-accumulation stage (35-64 years) of the lifecycle. The full extent of the disability wealth-penalty can only be observed by looking at age or lifecycle profiles. We find evidence of cumulative disadvantage related to disability longevity and cumulative advantage to remaining disability free. Part of the disability wealth-penalty can be accounted for by lower average levels of education among disabled people and by their lower position in the socio-economic classification (NS-SEC) reflecting lower profiles of lifetime earnings and household income. The evidence points to a situation where disabled people have been unable to save and accumulate assets to anything like the extent of their non-disabled peers most likely through lower long term income and extra costs associated with disability. This puts them at a disadvantage in terms of being able to draw on an asset in times of need when expenditure needs exceed current levels of income, lower pension wealth on entering retirement and less likely to be in a position to benefit from the 'asset-effect' and more generally is a matter of concern in terms of equality and social mobility.

Suggested Citation

  • Abigail McKnight, 2014. "Disabled People’s Financial Histories: Uncovering the disability wealth-penalty," CASE Papers case181, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case181
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    File URL: https://sticerd.lse.ac.uk/dps/case/cp/casepaper181.pdf
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    References listed on IDEAS

    as
    1. Abigail McKnight, 2011. "Estimates of the asset-effect: The search for a causal effect of assets on adult health and employment outcomes," CASE Papers case149, Centre for Analysis of Social Exclusion, LSE.
    2. Eleni Karagiannaki, 2011. "The impact of inheritance on the distribution of wealth: Evidence from the UK," CASE Papers case148, Centre for Analysis of Social Exclusion, LSE.
    3. repec:cep:sticas:/148 is not listed on IDEAS
    4. Karagiannaki, Eleni, 2011. "The impact of inheritance on the distribution of wealth: evidence from the UK," LSE Research Online Documents on Economics 43895, London School of Economics and Political Science, LSE Library.
    5. Tania Burchardt, 2000. "The Dynamics of Being Disabled," CASE Papers case36, Centre for Analysis of Social Exclusion, LSE.
    6. repec:cep:sticas:/149 is not listed on IDEAS
    7. Melanie K. Jones, 2008. "Disability and the labour market: a review of the empirical evidence," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 35(5), pages 405-424, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    wealth; disability; inequality; lifecycle;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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