Consequences of Employment Protection? The Case of the Americans with Disabilities Act

The Americans With Disabilities Act (ADA) requires employers to accommodate disabled workers and outlaws discrimination against the disabled in hiring, firing, and pay. Although the ADA was meant to increase employment of the disabled, it also increases costs for employers. The net theoretical impact turns on which provisions of the ADA are most important and how responsive firm entry and exit is to profits. Empirical results using the CPS suggest that the ADA had a negative effect on the employment of disabled men of all working ages and disabled women under age 40. The effects appear to be larger in medium size firms, possibly because small firms were exempt from the ADA. The effects are also larger in states where there have been more ADA-related discrimination charges. Estimates of effects on hiring and firing suggest the ADA reduced hiring of the disabled but did not affect separations. This weighs against a pure firing-costs interpretation of the ADA. Finally, there is little evidence of an impact on the nondisabled, suggesting that the adverse employment consequences of the ADA have been limited to the protected group.