The Impact of Disability on Earnings and Labour Force Participation in Canada: Evidence from the 2001 PALS and from Canadian Case Law

By Brown, Cara L.; Emery, J. C. Herbert | Journal of Legal Economics, April 2010 | Go to article overview
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The Impact of Disability on Earnings and Labour Force Participation in Canada: Evidence from the 2001 PALS and from Canadian Case Law


Brown, Cara L., Emery, J. C. Herbert, Journal of Legal Economics


Abstract

Using Statistics Canada's 2001 "Participation and Activity Limitation Survey" (PALS) this paper examines the impact of disability on the annual earnings and labour force participation of Canadian men and women. The study's findings include estimates showing large earnings penalties associated with disability ranging from 21 percent for mild disabilities to over 50 percent for very severe disabilities. This study also finds that disability is associated with a 30-percentage point reduction in labour force participation. These estimates of the impact of disability are comparable to other studies for more severe disability but this study's estimates of the impact of milder disabilities are substantially and significantly larger. This difference likely reflects improvements in the PALS design over previous surveys like the "Health and Activity Limitation Survey" (HALS) and "Labour Market Activity Survey" (LMAS) in accurately identifying mild disability versus non-disability. The article concludes with excerpts from several Canadian cases where written judgments from the trial judges provide insights into how the trier of fact uses the HALS and PALS data to link an assessment of loss of income damages to an individual plaintiff.

I. Introduction

From the 2001 Participation and Activity Limitation Survey ("PALS"),1 12.4% of the total Canadian population reported being disabled (11.5% males, 13.3% females). In the 2006 PALS, these rates changed to 14.3% overall (13.4% males, 15.2% females).2 Of the 3.4 million disabled adults in Canada, over 2.5 million individuals reported a disability involving mobility. With such large numbers, understanding the relationship between disability and labour market outcomes is of interest to policy makers who design, manage, and investigate reforms for income support programs for the disabled. In addition, the wage gap and differing labour force experiences of persons with disabilities vis-à-vis non-disabled persons can have some practical application in economic assessment for civil litigation. After presenting the results from the 2001 PALS, this paper discusses their introduction into Canada's court system and how various judges in reported cases have viewed them.

This paper examines the impact that a disability has on the employment income and labour force participation of Canadian men and women using data from the 2001 PALS public use micro-data file ("PUMF"). These estimates show large earnings penalties associated with disability ranging from 21 percent for mild disabilities to over 50 percent for very severe disabilities. Additional findings indicate that disability is associated with a 30-percentage point reduction in labour force participation. Relative to previous studies of the impact of disability in the Canadian labour market, this study's estimates for more severe disability are comparable, but its estimates of the impact of milder disabilities are substantially and significantly larger. This difference likely reflects improvements in the PALS design over previous surveys like the Canadian HALS surveys (the 1986 and 1991 Health and Activity Limitation Surveys (HALS) which were the precursors to the 2001 PALS), and the Canadian Labour Market Activity Survey ("LMAS")3 in accurately identifying mild disability versus non-disability. Labour force participation rates of the disabled have changed little between the HALS 1991 and the PALS 2001, suggesting that either employment opportunities for the disabled did not improve during the economic expansion, or that labour supply decisions of the disabled are inelastic. Interestingly, in the US, recent studies have concluded that a "downward trend in employment for people with disabilities began in the 1990s and has continued on to the present" Barnow (2008)4

The close of the article provides excerpts from actual Canadian reported cases where judges have commented on how they view the HALS and PALS data and how they have been used to establish awards for loss of income in Canada.

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