5.3 Deep dive 3: Addressing the Disability Employment Gap

Key-takeaway

The Disability Employment Gap (DEG) has shrunk by a fifth between 2014 and 2023, but a rise in the population share of people with disabilities means, that the gap remains an important challenge to be solved. Previous research has also shown that employment rates and employment conditions of people with disabilities are disproportionately affected by economic downturns (Jones et al., 2021). In this deep dive we investigate the educations’ role in addressing the disability employment gap. While educational attainment among people with disabilities has provided large welfare improvements for individuals and society, our analysis suggests that the DEG would only shrink from 29 to 26 ppts. if the education levels of people with disabilities were to match the levels of people with no disabilities across the Nordic countries.

Unsurprisingly, the likelihood of being employed is heavily influenced by disability, i.e. being limited in daily activities because of lasting health concerns. A rough quarter of the Nordic labour force has some type of disability which should bring the topic to the forefront of public policy. Effectively narrowing down the DEG could be part of the solution of increasingly complex challenges facing policymakers in the Nordics.

The key-takeaway is supported by calculations highlighting that educational attainment for people with disabilities in the Nordic Countries is already high and employment gaps persist even at the highest levels of education – this combination means that the potential for bringing down the DEG by increasing educational attainment is limited highlighting that other structural barriers in the labour market persist.

Governments and companies must ensure reasonable accommodation, provide support, and foster a more inclusive culture. Research shows barriers regarding obtaining jobs, but also within the workplace, where employees with disabilities may experience exclusion and marginalisation. (Mik-Meyer, 2016). This has been documented even for organisation that place emphasis on work inclusion of people with disabilities, which points to the importance of developing knowledge and practices that make work and employment sustainable for people with disabilities.

Narrowing down the DEG can address challenges facing the Nordic Countries:

One in four adults has a disability.

NEETS (youth not in employment, education, or training) are twice as likely to have a disabil1ity compared to their peers.

Source: Statistics above as well as the analysis is based on the EU-SILC database.

Among people with disabilities:

55 pct. are women.

One in three faces financial insecurity.

One in seven faces unmet healthcare needs.

Source: Statistics above as well as the analysis is based on the EU-SILC database.

Individuals with disabilities experience higher rates of economic and medical challenges compared to the general population and are disproportionately female. These disparities underscore the urgent need for targeted attention to this group due to the severity of the inequalities they face. Tackling workplace inequality is a crucial step toward addressing these broader disparities and enhancing the overall well-being of people with disabilities.

Figure 5.3.1 People with disabilities in the Nordics face a multitude of challenges

Source: EU-SILC.
Note: 16-64-year-olds in the years 2017-2020. See appendix B for an in-depth explanation.

The disability employment gap in the Nordics has been historically larger than in the EU (see figure 5.3.2 and figure 5.3.3), which is due to a combination of availability of welfare state arrangements and the Nordic countries’ being on the forefront of the normalisation movement (Tøssebro et al., 2012; Gjertsen et al., 2021). While the disability gap is showing signs of narrowing, the proportion of the population with disabilities is rapidly increasing. As a result, the disability employment gap already impacts a significant number of people and may affect even more in the future. This underscores the urgent need for focused efforts to reduce employment disparities.

Figure 5.3.2 The Nordic DEG has shrunk by a fifth since 2014...

DEG in the Nordics and EU

Source: Eurostat.
Note: 16-64-year-olds. Iceland left after out 2019 due to data limitations. Nordic countries weighted by population.

Figure 5.3.3 …but a rising share with disabilities means that the DEG remains a problem for many people

Disability shares in the Nordics and EU

Source: Eurostat.
Note: 16-64-year-olds. Iceland left after out 2019 due to data limitations. Nordic countries weighted by population.

We cannot rule out the possibility that one factor contributing to the shrinking disability employment gap is the increasing share of individuals who identify as having a disability and the increased recognition of mental health issues, intellectual disability and chronic illness. It is therefore possible that some individuals who self-identified as having a disability in 2023 might not have done so in 2014. Disability pension systems in the Nordic countries rely on socio-medical criteria for assessing eligibility, which implies that the most severe disabilities have traditionally been included in the disability pension systems. Increased recognition of other, and in many cases less severe, conditions, expands the scope of functional limitations at work and creates more diverse challenges in terms of accommodations and inclusion. These evolutions in definitions of disability may also explain the lower disability employment gap in more recent data. Therefore, changing disability employment gaps do not mean that barriers for certain types of disabilities have been successfully addressed.

Working-aged people with disabilities make up a significant portion of the population of the Nordic countries. Labour market participation, however, is significantly lower than for people with no disability (figure 5.3.4). Labour market participation based on inclusion may be beneficial both for the individual, who sees higher income, a sense of community and purpose, as well as for the society, which sees increased tax revenue and a higher level of social cohesion, and for companies who can access valuable labour resources.

Figure 5.3.4 Gap in employment is large

Employment gap between people with disabilities and people with no disability, 2017–2020

Source: EU-SILC data.
Note: 30–64-year-olds.

Definition of disability and disability employment gap

The definition of disability used in this analysis (and in other work like Van der Zwan & de Beer (2021)) aligns closely with the standard definition in disability discussions.
It encompasses individuals who report limitations in their daily activities due to long-standing health issues or disabilities. This includes a broad range of conditions, from work-related injuries like knee problems in construction workers to social anxiety and wheelchair use, if these conditions lead to perceived limitations in daily activities.

We follow the standard definition of the difference in employment rate in percentage points between people with disabilities and people with no disability.

This analysis seeks to uncover how education fits into this picture and how much of the employment gap could potentially be narrowed down by increasing the educational attainment of people with disability to the level of people without disability.

At least part of the employment gap between people with disabilities and people with no disability in the Nordic countries is attributable to differences in education levels (i.e. education gap). On average, people with disabilities have a lower level of education (figure 1.5). Since higher levels of education is generally found to increase employment rates, education alone explains some of the disability employment gap (DEG).

Further examining the data reveals that the gap between people with and without disabilities persists at higher levels of educational (figure 5.3.6). The disability employment gap, however, appears to be shrinking with an increase in educational attainment. This implies that the employment can be remedied but not entirely fixed, if the difference in educational attainment of people with disabilities and people with no disability were to be eliminated.

Figure 5.3.5 People with disabilities generally have a lower level of education

Population shares by educational attainment, 2017–2020, Denmark, Finland, Norway and Sweden

Source: EU-SILC data.
Note: 30-64-year-olds.

Figure 5.3.6 Disability employment gap shrinks at higher levels of education

Employment share by educational attainment, 2017–2020, Denmark, Finland, Norway and Sweden

Source: EU-SILC data.
Note: 30-64-year-olds.

In accordance with previous findings, this suggests that education generally is important for individual level outcomes and offers a higher marginal benefit for people with disabilities compared to people with no disability. This implies a shrinking disability employment gap at higher levels of education (figure 5.3.6).

To make a general assessment of the potential for narrowing down the macro-level DEG by means of education policies it is important to also consider potential number of people with disabilities that can be upskilled to a higher level of education. In the following section we combine the two to assess the potential from efforts to increase educational outcomes for people with disabilities.

Decomposing the disability employment gap

Our analysis suggests that the potential for narrowing the DEG by means of higher education is limited in the Nordic countries. We estimate that the average employment rate for people with disabilities would increase roughly three percentage points if their educational attainment matched the average of the people with no disability in the Nordics countries. i.e. the DEG would decrease from 29 to 26 ppts.

The results stem from a regression-based approach that allow us to break down the differences in employment rates into two parts; namely one (explained difference) which is due to differences in observable characteristics and on the other hand those that are unexplained. The results from this relatively simple mechanical calculation are illustrative of the potential for narrowing the DEG by increasing the level of education among people with disabilities.

Figure 5.3.7 Closing the educational gap would imply a 3 ppts. decrease in the employment gap

Employment gap decomposition

Source: HBS Economics Blinder-Oaxaca decomposition, EU-SILC data.

Other observables includes e.g. age, gender, marital status, children, housing.

Explanation of the decomposition

We use a Blinder-Oaxaca decomposition following among others Bryan et al. (2023).

The decomposition is a statistical method used to analyse differences between group averages. It is particularly common in labour economics to understand wage disparities and employment gaps between different groups, such as between men and women, ethnic groups or in this case people with and without disabilities.

See appendix A for an in-depth explanation.

Given the fact that individual returns to education is considerably higher for people with disabilities than for people with no disability combined with the observed educational gap it seems somewhat at odds that closing the educational gap doesn’t resolve a larger part of the employment gap.

There are two reasons for this: The primary reason is that a significant employment gap persists between people with disabilities and people with no disability with a high educational attainment (figure 5.3.6). The secondary reason is that educational attainment for people with disabilities in the Nordics is already high, implying a limited growth potential (figure 5.3.5).

This demonstrates that increasing the educational attainment can help reduce the disability employment gap, but only relying on education policies is insufficient in addressing the entire disability employment gap. Therefore, governments seeking to reduce the disability employment gap ought to direct a larger effort into breaking down the barriers preventing or barring people with disabilities from employment despite their educational status.

Avenues for addressing the disability employment gap

Previous work in this project demonstrates that barriers exist within the support systems in the labour market and employers’ organisations, which may keep people with disabilities from obtaining and maintaining jobs, developing their careers, and more generally experiencing inclusion in the workplace (see e.g., Colella (1999) for an overview and Gjertsen et al. (2021) for a specific Nordic overview). Research has pointed to many specific barriers, including expectations of lower productivity, information gaps and risk-aversion related to hiring employees, prejudice and discrimination, and costs and lack of expertise associated with providing reasonable accommodations (Højbjerre et al., 2023). Recent Norwegian studies demonstrate the stereotypes and prejudices experienced by job applicants with disabilities (Bjørnshagen & Ugreninov, 2021; Berre, 2024), with for example wheelchair users receiving only half the callbacks after an initial job application in comparison to applications that did not disclose any disability, highlighting widespread discrimination in hiring practices.

To address barriers like these, governments and employers need to focus on three key elements to reduce the structural causes of the disability employment gap. These include:

Insufficient support for reasonable accommodations in the workplace: some work tasks may be unfeasible for a person with a disability without reasonable accommodations. The latter are a right enshrined in the UN Convention on the rights of persons with disabilities (United Nations, 2007) and national legislation in the Nordic countries. Governments and employers should provide sufficient support and resources for reasonable workplace accommodations, such as flexible scheduling, adaptive technologies, or workplace modifications. Simplifying the process for requesting and obtaining accommodations is essential, and it is equally important to ensure that employees with disabilities are aware of their rights and the resources available to them. A lack of accommodations can unfairly limit their ability to contribute effectively to the workplace. Further, the cost of making such accommodations for people with mild physical disabilities is often relatively cheap and simple to implement (Zolna et al, 2008).
Compensation schemes: To incentivize employers to hire individuals with disabilities, wage subsidies are a measure that has been in place for decades in OECD countries (OECD, 2010, 2022), including in the Nordic countries. Its effects, however, are not clear-cut, and there are indications that wage subsidies may have no impact on employment of people with disabilities or even adverse impacts, where eligibility for wage subsidies is viewed by employers and co-workers as an indication of the person being less competent or less productive (see Angelov & Eliason, 2018; Jammaers et al., 2016). A Danish study (Datta Gupta & Larsen, 2010) indicates that wage subsidies may be successful at increasing placement of people with disabilities in jobs, but this is contradicted in a more recent Belgian study (Baert, 2016). In addition, quantitative research is lacking with regard to whether wage subsidies assist in making workplaces more inclusive. They have, at least discursively, been framed as compensations for perceived lack of productivity and employers’ perceptions of risk associated with hiring a person with a disability.
Combat exclusionary cultures in the workplace: Employers must actively combat exclusionary behaviours, whether they stem from conscious bias, lack of awareness, or unintentional exclusion. For example, Bredgaard & Shamshiri-Petersen (2018) suggests that a lack of knowledge is an unconscious barrier for hiring individuals with disabilities among managers. This includes fostering a culture of openness and encouraging inclusive language and practices. Leadership must set a strong example by promoting diversity and inclusion as core values, helping to break down stigmas and stereotypes that often limit opportunities for individuals with disabilities. Other studies have pointed to the potential of informal support provided by mentors and co-workers (Gustafsson et al., 2018). An emphasis on work inclusion, as exemplified in the model developed in Canada (Lysaght et al., 2012) creates opportunities for employers’ organisation to engage with diversity in a broad sense, which may lead to improved workplace culture and stronger diversity policies. Research in Iceland (Hardonk & Halldórsdóttir, 2021) suggests that caseworkers in supported employment services have the potential to contribute to organisations’ inclusive competence, however current caseload, definitions of targets and what constitutes ‘successful placement’, and lack of instruments to incentivise employers make it difficult for the professionals to take up this role as ‘inclusion coaches. This shows the potential of existing labour market services when viewed from a lens of work inclusion of people with disabilities.

The right to work is defined in the UN Convention on the rights of persons with disabilities within the context of an inclusive work environment, which requires the Nordic countries, as signatories of the convention, to engage with the complex challenges related to developing Nordic labour markets so that they are able to deal with diversity and enjoy the benefits of providing everyone with equal opportunities to contribute. Interventions must balance the concerns of both employees and employers, support for inclusion and reasonable accommodations, while not placing an insurmountable burden on employers. Initiatives related to inclusive human resource management in the USA show the potential of such interventions (see for example: https://www.benchmarkability.org/) and the Nordic countries are ideally placed, with strong welfare systems and services, to form an alliance with the organisations of people with disabilities, employers and professionals in support systems to develop an inclusive labour market.

Appendix A: Blinder-Oaxaca decomposition

Method

This analysis is based on the study "The Role of Education in The Disability Employment Gap" by Bryan et al. (2023). We use a method called the Blinder-Oaxaca decomposition to understand what influences employment status for people with disabilities and people with no disability respectively. This method involves looking at each group separately and then comparing the results to see why there's a difference in employment rates.

The Blinder-Oaxaca decomposition uses separate calculations for the employment status of people with disabilities and people with no disability.

The formula is:

ȳ_N-ȳ_D=\betâ_D(x̄_N-x̅_D)+x̅_D(\betâ_N-\betâ_D)+(x̅_N-x̅_D)(\betâ_N-\betâ_D)

The left hand side of the equality,

ȳ_N-ȳ_D

represents the difference in average employment for people with disabilities and people with no disability, i.e. the disability employment gap, in percentage points.

The first part of the right hand side of the equality,

β ̂_D (x ̅_N-x ̅_D )

, shows how much of the gap is due to differences in average characteristics (like education or work experience) between the two groups.

The second part,

x ̅_D (β ̂_N-β ̂_D )

, shows how much of the gap is due to different outcomes for the same characteristics. If people with disabilities and people with no disability were the same except for their disability status, this part would explain the whole gap.

The third part,

(x ̅_N-x ̅_D)(β ̂_N-β ̂_D )

, shows the combined effect of having different characteristics and different outcomes between the two groups.

Data

The analysis uses EU-SILC data from the Nordic countries between 2017 and 2020. As there is no data available for Greenland, Iceland, Åland og the Faroe Islands for the requisite years, those countries and territories are omitted from the analysis.
Following Albinowski, Magda & Rozszczypała (2023), people with less than primary education are also omitted from the analysis due to significant suspected heterogeneity with the rest of the population.

Employment is based on self reported primary status.

Disability status is based on self reported limitations in daily activites due to long-standing health issues.

Control variables

Like Bryan et al. (2023), this analysis includes control variables for sex, age group, marital status, children, housing, and urbanization.

Unlike Bryan et al., we have a less detailed birth country variable, using "LOC" (country where respondent lives), EU, and Other, where Bryan et al. (2023) uses individual country variables.

Following Van Der Zwan (2021), we categorize education into three levels: Lower than upper secondary, Upper secondary, Higher than upper secondary.

Appendix B: Method, Figure 1.1

Capacity to face unexpected financial expenses

Suggested question:
Can your household afford an unexpected required expense (amount to be filled) and pay through its own ressources? Yes/No

The amount to be entered should correspond to 1/12 of the national at-risk-of-poverty threshold for a single consumption unit. Data collection agencies may round the calculated value, provided the difference between the rounded and calculated values does not exceed 5%.

We have included answer “No” as “Unable to afford unexpected financial expenses”.

Ability to make ends meet

Suggested question:
A household may have different sources of income and more than one household member may contribute to it. Thinking of your household’s total income, is your household able to make ends meet, namely, to pay for its usual necessary expenses.

Respondents are asked to answer the question on a scale of 1 to 6 with the corresponding values:

With great difficulty
With difficulty
With some difficulty
Fairly easily
Easily
Very easily

We have included answers of 1–3 as having “Difficulty making ends meet”.

Unmet medical need

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