THE ECONOMIC COSTS OF DISABILITY FOR FAMILIES

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John Cullinan, NUI Galway, argues that in terms of educational attainment, labour market outcomes and social participation people with disabilities fare significantly worse across a wide range of measures.

This article deals with the effect of disability on income and position in society. It is based on research from NUI Galway and uses Irish data.
A famous economist, Amartya Sen saw two economic problems associated with disability:
1. the person – or family – with a disability will find it harder to get rich.
2. even if they make money (from a job) they will probably have to spend a proportion of it on their extra needs.
This disadvantage goes hand in hand with the fact that people with disabilities are less likely to have a good education than others and more likely to come from a poorer background. The Irish data that Cullinan presents backs this up.
The extra costs of disability differ, depending on things like household size and level of disability, but Cullinan and Lyons estimate that, depending on how the calculation is done, they run at between 35% and 55% of average income – in other words about half. The same holds true of children with disability- as well as the extra expenses, it is more difficult for their chief carer/ parent to hold on to a job. Altogether this means people with disabilities generally need extra money to have the same standard of living as others.
This article supports the need for a Costs of Disability allowance from the State – something that has been debated since the publication of Strategy for Equality in 1996. Such a payment would take account of unavoidable expenses related to disability. Without it people with disabilities are likely to continue facing higher costs on lower incomes.

In a much-cited speech to the World Bank in 2004, the Nobel Prize winning economist Amartya Sen made a distinction between two types of economic costs, or what he called ‘handicaps’, that tend to be associated with disability (Sen 2004). First, according to Sen, individuals with disabilities face lower human capital accumulation (e.g. education) possibilities, are less likely to be employed, and even if employed are likely to have lower earnings. This he called an ‘earnings handicap’. Second, because individuals with disabilities tend to have extra needs, they face greater difficulties in achieving economic well-being from a given level of resources, i.e. they face what Sen called a ‘conversion handicap’. Together these two types of economic costs have very significant implications for the economic situation of the disabled population and their families. In this context, this article reviews the evidence on these costs in Ireland and discusses their implications for poverty, deprivation, economic hardship and social exclusion. It also sets out some thoughts on an appropriate public policy response.

Education and labour market outcomes

Analysing the relationship between disability and educational attainment is complicated by the fact that, while disability can have a negative impact on educational attainment, it is also the case that low education is associated with an increased probability of acquiring a disability. Nonetheless, the evidence in relation to the association between disability status and level of educational attainment is striking. For example, Nolan (2014a) shows that for adults with disabilities, 43% have not progressed beyond primary education, compared to 19% of all adults. Indeed, for those with an intellectual and learning disability, 63% have not progressed to second level education. Furthermore, he shows that only 10% of people with disabilities have a third-level degree, compared to 19% of all adults. Once individual-level differences are accounted for (e.g. age and gender), analysis of the relationship between long-term illness or disability and educational attainment suggests that the probability of having no educational qualifications is increased by 22 percentage points for someone who is severely hampered as a result of disability, and about 18 percentage points higher if hampered to some extent (Nolan, 2014a). The implications of this and other research undertaken on the issue are that levels of educational attainment are considerably lower amongst the disabled, with negative implications for a range of important future outcomes, including labour market outcomes.

Moving to the labour market, recent research also shows that people with disabilities face many barriers to full participation in the labour market and, as a consequence, their labour force participation rates and employment rates are considerably lower than others of working age (Nolan, 2004b). For example, in the 2006 Census of Population, only 35% of persons with a disability aged between 25 and 64 years were in work, compared to 73% of all adults. The percentage at work was particularly low for those with a physical, psychological or emotional disability. However, it is not just the likelihood of having a job that is affected. Disability is also likely to have an impact on earnings for those who are in work. Nolan (2004b) states that ‘while estimating these effects is complicated by the fact that those with a disability and in employment may have distinctive characteristics, the evidence suggests a significantly lower predicted hourly wage for an otherwise identical individual reporting a hampering chronic illness or disability.’

Poverty and social exclusion

Thus far the evidence presented suggests that individuals with a disability are negatively impacted in terms of educational attainment and labour market outcomes, both of which are crucial for the economic well-being of these individuals and their families. In terms of these impacts, Nolan (2014a) highlights the heightened poverty risk and experience of consistent poverty for people who had a chronic illness or health problem, or who were limited in their activities. For example, the so-called ‘at risk of poverty’ rate was considerably higher for households with an individual with a disability (16.0% versus 12.7% in 2008), while the ‘consistent’ poverty rate was double (6.4% versus 3.2%). The work also highlights that disability impacts on broader aspects of participation in community life and that this is also of central relevance in terms of the social exclusion experienced by disabled people more broadly (Nolan, 2014a).

Direct costs

The discussion so far tells only part of the story in terms of the economic costs of disability for families. The impacts of disability on educational attainment and labour market outcomes are clearly related to Sen’s notion of an ‘earnings handicap’. However, of equal, or perhaps even more, significance is his concept of a ‘conversion handicap’ and recent work by Cullinan and Lyons (2014) has investigated this issue in detail. Their analysis considered the direct private economic costs borne by households containing disabled persons when compared to the wider population. Because households with an individual with a disability divert scarce resources (i.e. their income) to purchase disability-related goods and services, they suffer from a conversion handicap in terms of translating their income into economic well-being. Using a ‘standard of living’ approach, the authors defined the direct economic costs of disability as the extra income required by a so-called ‘disabled household’ to achieve the same standard of living as an equivalent ‘non-disabled household’ and sought to estimate these direct cost.

Using data for 2011, the study found that these direct economic costs are significant, vary by the number of individuals within a household with a disability and also by the extent to which an individual is limited by their condition/disability. Overall the main finding is that the estimated economic cost of adult disability is 35.4% of income (or about €207 per week) on average, using a ‘condition-based’ measure of disability, and 54.5% (or €276 per week) on average using a ‘limitation-based’ measure of disability. These are the central estimates of the additional income that would be required for disabled households at the median income levels to attain the same standard of living as an equivalent non-disabled household. Other findings of the research suggest that the additional costs of disability are borne most heavily by those individuals who suffer the most from their disability in their day-to-day lives, and those living in households with multiple disabilities.

These findings are important. They suggest that disabled households divert a very high percentage of their income to goods and services they would not ordinarily choose to purchase. This is at the expense of goods and services that are typically associated with economic well-being, which they may be forced to forego. The results also have important implications for the measurement of poverty amongst those with a disability in Ireland. Since disability reduces the standard of living of individuals with a disability, poverty measures such as those presented above will likely underestimate the needs of these individuals. Thus, adjusting household data for disability would actually likely increase poverty rates in the country.

What to do?

In terms of policy implications, the evidence clearly suggests that current policy does not go far enough in addressing the extra costs faced by individuals with a disability in Ireland and it supports the case for the introduction of a ‘cost of disability payment’, a cash payment that takes into account the extra and unavoidable expenses incurred by individuals with a disability and their families. There has been a protracted debate in Ireland concerning the possible introduction of a cost of disability payment, though the importance of this issue has been acknowledged by many, including the Commission on the Status of Disabilities in Ireland and the United Nations. While the level and nature of government assistance are ultimately determined by social and political choices, the evidence presented here is that there are a wide range of very significant direct and indirect economic costs of disability that imply people with disabilities and their families are much more likely to face poverty and economic hardship. Quite simply, current policy does not adequately address these issues.

The economic impact of childhood disability

While the analysis presented thus far has considered the economic costs of disability for adults and their families, recent research has also considered some of these issues for children with disabilities (Cullinan and Roddy, 2014). In particular, the research presented, for the first time, a socioeconomic profile of childhood disability in an Irish context. Using data from the Growing Up in Ireland survey, it considered the association between a range of socioeconomic measures and the disability status of nine-year-old children in Ireland. The findings are striking. They suggest that, overall, the primary carer of a child with a disability is considerably less likely to participate in the labour market and considerably more likely to turn down work opportunities, when compared to a primary carer of a child without a disability. Indeed, these differences are found to be more pronounced, the more limiting is the child’s disability. Similar patterns are also found in relation to parental education and social class. Parents of a child with a disability are less likely to be educated at third level and more likely to be in the lowest social class. Not surprisingly, these households also tend to have lower incomes and much greater difficulty in making ends meet. In fact, for all of the socioeconomic measures examined in the research, the presence of a child with a disability in a household is strongly correlated with worse outcomes. In considering these results, it is important to also acknowledge the intangible costs of childhood disability to the child, their family and society. Studies show that raising a child with a disability places complex demands upon various aspects of family functioning and may increase stress, as well as affecting family members’ health and general wellbeing (Reichman et al. 2008; ISPCC 2007; Seltzer et al. 2001).

In conclusion

The research described in this article portrays a worrying picture of the economic circumstances of the disabled and their families in Ireland. The evidence is clear that in terms of educational attainment, labour market outcomes and social participation more generally, people with disabilities who are hampered in their day-to-day lives fare significantly worse across a wide range of measures. Furthermore, people with disabilities and their families face a whole host of additional direct costs which lead to a further reduction in their living standards. As it stands, it is evident that policy in Ireland does not go far enough in addressing these issues and, in this context, a cost of disability payment should be considered as a way of alleviating some of these adverse outcomes.

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