Tuesday, January 22, 2008

Unintended Consequences?

In the latest in their occasional Freakonomics column in this past Sunday's NY Times Magazine, journalist Stephen Dubner and economist Steven Levitt tell three stories of unintended consequences. One of their two principal modern examples involves the Americans With Disabilities Act, which, they say, had the perverse effect of lowering the employment rate of Americans with disabilities. Citing a study by economists Daron Acemoglu and Joshua Angrist , Dubner and Levitt explain: "Employers, concerned that they wouldn’t be able to discipline or fire disabled workers who happened to be incompetent, apparently avoided hiring them in the first place."

An interesting story, but is it true? Well, for one thing, it's not clear that Dubner and Levitt understand the argument they're reporting: Fear of back-end lawsuits by dismissed members of a protected class is a frequent argument made against non-discrimination mandates in general, but the particular worry with respect to the ADA has typically been that its requirement of "reasonable accommodations" for disabled workers would impose higher costs on employers for workers they don't fire. The reasonable accommodation requirement of the ADA distinguishes it from Title VII, the general federal anti-discrimination in employment statute. By failing to confine their argument to the disability context, Dubner and Levitt (perhaps unwittingly) suggest that all anti-discrimination law is perverse.

What about the core empirical claim? Here's what Washington University of St. Louis Law Prof. Sam Bagenstoss had to say in a 2004 article in the Berkeley Journal of Employment and Labor Law:
In brief, though I find it hard to disagree with the claim that the statute (at least initially) imposed some negative pressure on employers' decisions to hire some people with disabilities, critics of the statute have argued well beyond their data in urging that the ADA be abandoned. To the contrary, the data suggest that much (though probably not all) of the employment decline for people with disabilities resulted from factors extrinsic to the statute. In particular, I find quite plausible the argument that the 1990-1991 recession pushed an unusually large number of people with disabilities out of the workforce and onto the SSDI rolls--an argument pressed by the economists John Bound, Timothy Waidmann, David Autor, and Mark Duggan--though it is difficult empirically to disentangle that phenomenon from the effects of the ADA. Moreover, whatever the ADA's short-term effects, it seems likely that the statute's net long-term effects on employment for people with disabilities will be positive.
Dubner and Levitt could be forgiven for not reading all of the relevant law review literature; they are after all, not legal academics or lawyers, and disciplinary boundaries are often substantial. But even if they were unaware of the Bagenstoss piece, surely they must know of the whole book on the subject that Bagenstoss was reviewing, as it is very much a work of economics.

In addition to the factors Bagenstoss cites, one might also note---though Dubner and Levitt fail to do so---that discriminating against disabled persons at the hiring phase is also illegal. And as various scholars have noted---including Yale Law Prof Christine Jolls (also an economist) in a 2000 Stanford Law Review article ---there is relatively lax enforcement of the ADA's prohibition of discrimination in hiring. To be sure, stricter enforcement at the front end would not be costless, and thus Dubner and Levitt could rationally oppose it on those grounds. But they don't even mention the front-end enforcement possibility.

At the end of their essay, Dubner and Levitt admit that not all laws have perverse consequences. Yet they leave the clear impression that they think the ADA does and inevitably must. Both claims are highly controversial. Dubner and Levitt present them as unarguable fact. Freakonomics indeed.

Posted by Mike Dorf


Caleb said...

Even assuming that the ADA does have the perverse effect that they claim, do you think it would be legitimate to argue that it was justified? I guess the argument would run that even if it reduced the number of employed disabled people, by ensuring that those disabled persons who were employed were given opportunities to make an equal contribution it would lead to greater acceptance and equality for disabled people in general when non-disabled people recognized the contribution that their colleagues were making. It might even be possible to argue that this would increase employment of disabled people in the longer term.

I don't disagree with your critique of their economic arguments, I've just been wondering recently about how frequently economic arguments can operate to eliminate otherwise legitimate discussion of reasons for adopting certain laws (etc).

Sarah Lawsky said...
This comment has been removed by the author.
Sarah Lawsky said...

Let me just second your point that the economics literature on the disemployment effect has developed far beyond the single paper described in the article (and posted on the NY Times Freakonomics blog). That paper (Acemoglu & Angrist 2001) is one of the very earliest discussions of the topic and has, unsurprisingly, been subject to significant criticism and refinement within the economics literature, both in the book you mention and in separate articles.

See, e.g., A.J. Houtenville & R.V. Burkhauser, Did the Employment of People with Disabilities Decline in the 1990s, and was the ADA Responsible? A Replication and Robustness Check of Acemoglu and Angrist (2001) (2004) (concluding, based on a re-analysis of Acemoglu and Angrist's data, that the employment rate for people with disabilities did decline during the years in question, but the decline was not a consequence of the ADA); Christine Jolls, Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation: Preliminary Evidence on Educational Participation Effects, American Economic Review, 94:447-53 (2004) (arguing that some of the disemployment effect may be due to people with disabilities choosing to pursue education, instead of entering the work force immediately, because of increased educational opportunities due to the ADA).

Shorter version of this comment: What you said! Freakonomics indeed, indeed!

Sarah Lawsky

Adam P. said...

What some of this work also fails to capture is that the ADA does not generally make physical or mental impairments a per se disability. (E.g., There was a recent 11th Cir. decision which held that mental retardation was not a disability under the ADA.) We're not talking about some fixed category of "disabilities" that we can compare employment outcomes on. There's also a strong case that the ADA and other anti-discrimination laws have made people more forthcoming with their disabilities, particularly those with "invisible" disabilities (e.g., mental health). This is supported by general increases in the number of people "with disabilities" since the 1980s.
Generally, it's thus very hard to compare employment rates of Americans "with disabilities" pre-1991 and today.

Anonymous said...

See the discussion here (Ted Frank seems to disagree with your point):


Stuart Buck said...

1. It's Bagenstos. And all due respect to him, but it's rather remarkable to suggest that Levitt/Dubner are to be faulted for looking at a peer-reviewed article by two of the most respected economists in the country (Acemoglu and Angrist) rather than at a book review written by a non-empirical scholar in a non-peer-reviewed secondary law journal.

2. In fact, why would Levitt and Dubner need to be "forgiven" for not reading the "law review literature"? That's not where one would normally look to find any peer-reviewed economic analyses.

3. Why is it relevant that hiring discrimination is illegal? Of course it is, but the point is that it's much harder to enforce than discrimination on the job (as I learned in Christine's employment law class 9 years ago at Harvard). People apply all the time for jobs that they don't get -- and unless you have some special insider access that allows you to know who was hired, what was said during the process, etc., it's very hard to come up with evidence that discrimination occurred. (At least as compared to on-the-job discrimination -- by definition, you're already working there, and can directly see how other co-workers are treated, whether certain people get fired, etc.) In other words, "front-end enforcement" isn't necessarily that easy.

Wilson said...
This comment has been removed by the author.
Steve said...

I am dubious that a blog committed to issues of law would have a less jaded eye on this issue than Levitt and Dubner.

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