Literature review of disability employment in small firms and Title I ADA compliance

Work Disability in Small Firms Chapter II

Work disabled ChII Lit Review

Review of Literature Demonstrates Information Gap and Identifies Methods

This chapter justifies the problem statement and research questions, and locates the results among existing research. Copious data and analysis describes pronounced unemployment for potential workers with disabilities and lower income where workers with disabilities are employed, compared to the general U.S. workforce, extensive policy intervention notwithstanding. Fewer studies focus on workers or potential workers with disabilities in the Atlanta-Sandy Springs-Marietta, Georgia metropolitan statistical area, and even at the national level, very few juried reports describe productivity and job satisfaction for workers with disabilities in firms smaller than fifteen employees. Firms with fewer than fifteen employees are exempt from compliance with Title I of the ADA, but stimulating employment for workers with disabilities in these firms may improve economic self-sufficiency for this historically disadvantaged population. Conversely, if productivity and job satisfaction are higher in larger firms, vocational support resources may deliver higher return targeting those employers for potential workers with disability. This chapter reviews existing research trends, demonstrates shortfalls in current information, justifies research methods adapted from and contributing to existing precedent, and defines the parameters and analytical schema supporting inference toward the local workforce with disabilities in firms above and below 15 employees.

ADA And Subsequent Law Define The Parameters For Study

ADA was the modern turning point for all facets of disability policy in the U.S., conferring legal recognition for that historically marginalized condition. Therefore the passage of 42 U.S.C. As ADA is formally known sets a benchmark in time before which any research become questionable if not necessarily irrelevant, since the institutional environment was materially different before and after 1990. The major section of ADA relevant to this research is Title I, which prohibits discrimination in employment on the basis of disability given identical qualifications up to the point that "reasonable accommodation" becomes an "undue hardship" for employers depending on a number of factors including firm's available resources and structure, among other conditions (Pub. L. 110-325, § 2, sec. 12111.10A). The other language in ADA most salient here is the definition of disability, particularly as "being regarded as having such an impairment" after certain other specific characteristics if action on such perception results in discrimination (Pub. L. 110-325, § 2, sec. 12102.1c). Employers must provide reasonable accommodation, from wheelchair ramps and accessible facilities to telecommuting and an evolving array of technological innovations, in order to avoid discriminating against potential hires with disabilities where they are the most qualified candidate. This entails applicants disclose disability, a decision many often decline if possible due to real or perceived stigma that results in markedly lower employment and earnings for workers and potential workers with disability.

Subsequent to and despite ADA, courts restricted definition of disability to the degree that the 110th Congress passed the Americans with Disabilities Act Amendment Act, Public Law 110-325, in order "to express Congress' expectation that the Equal Employment Opportunity Commission will revise that portion of its current regulations...to be consistent with this Act, including the amendments made by this Act" as of 1 January 2009 (Pub. L. 110-325, § 2, 122 Stat. 3553). The Equal Employment Opportunity Commission, which administers and enforces the newly-amended ADA explained that the courts "had interpreted the definition of disability so narrowly that hardly anyone could meet it" (Office of Disability Employment Policy, 2011, n.p.). ADAAA outlines the specific court decisions that ultimately led to new EEOC rules that became effective May 2011 (Office of Disability Employment Policy, 2011). Of primary importance for this research, one of the definitions ADAAA (now enrolled within "ADA") left in place was a threshold of fifteen employees as the cutoff size below which ADA Title I does not apply. "ADA" hereinafter means the new, amended ADA post 1 Jan. 2009.

Most classifications of firms by size do not match the ADA threshold.

Hence the research questions in this study attempt to define worker satisfaction and productivity in firms under fifteen employees, which does not match typical definitions of 'small enterprise.' The U.S. Small Business Administration (SBA) definition of business size is complex rather than simple, depending on particular industries and annual receipts, not just above or below 500 or 100 employees as many authors claim (e.g. Tocher and Rutherford, 2009, p. 463 or Day and Greene, 2008, p. 644). The SBA considers a small business "one that is independently owned and operated, is organized for profit, and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period" (U.S. Small Business Association, n.d.). Examples of SBA definitions as "small" include but are not limited to under 500 employees for manufacturing depending on what the firm produces, but wholesalers are considered medium beginning at 100 employees, again "depending on the particular product being provided" (U.S. Small Business Association, n.d.). Services, retailing, construction and agriculture size classifications depend on annual receipts rather than employee size at different levels for different products. What this demonstrates is that widespread generalizations defining small to medium enterprises (SMEs) as under 500 or 100 employees over-simplify official classes but also that all of these thresholds include firms that are and are not beholden to ADA in the same class. Very few experts, for example Day and Greene (2008), consider microenterprise at levels above or below 15 or even 50 employees. The result is an information gap comparing firms above and below the number of employees exempt from ADA. Part-time employment for workers with disabilities is growing for diverse reasons (Hotchkiss, 2004, p.25) regardless of firm size, but some of the largest studies do not capture these dynamics, while others do but not on local levels or sorted by disability where they sort for size (U.S. Department of Labor Bureau of Labor Statistics, 2012, n.p.). Likewise some federal studies define self-employment differently depending on whether the firm is incorporated or not (U.S. Department of Labor Bureau of Labor Statistics 2011, n.p.), and so any research claims about self-employment may or may not match all data sources. This study aims to probe the size threshold and full- and part-time employment for employees with and without work-limiting disability, for similarities and differences that may justify further investigation, including self-employment regardless of incorporation for respondent and analytical convenience.

Defining productivity is one of the most elusive problems in economics.

Similarities and differences this study aims to investigate involve perceptions of job satisfaction and productivity for workers with disabilities in small firms, compared against workers without disabilities, and for both categories in larger firms, to provide benchmarks for triangulating satisfaction and productivity for the target population of interest with disability in small firms. Of secondary importance are demographic characteristics that may shed insight on the various groups, but most of the survey instrument items attempt to define disability status, firm size or job satisfaction and productivity. This requires defining those inherently subjective terms, around which an increasing literature has arisen over the last century or so. Since productivity and satisfaction are intellectual constructs that exist nowhere in discrete units that can be weighed or sliced into standardizeable portions like quantities in the physical sciences, defining productivity and satisfaction reduces to the semantic problem of defining words in terms of other words, which then have to be defined, with other words, etc. etc. So many attempts at definition of productivity and satisfaction exist that exhaustive description exceeds resources of space for this discussion, so the task becomes to identify and adopt useful characteristics of definitions that have been field-tested by other experts, since no comprehensive definition of either construct has been recognized by all experts as 'the best.' The survey instrument fielded in this study sets out multiple items that have different scaling in order to measure self-reported perceptions of productivity and satisfaction derived from prior research, including measures like earnings and tenure with and without bargaining unit coverage, along precedents described in academic and government precedent. In fact experts agree more that productivity and job satisfaction usually occur together, rather than on exactly what these two 'reifications' or constructs actually mean.

The U.S. Department of Labor Wage and Hour Division (DOL-WHD) publishes guidelines under which employers may pay less-productive workers, including those with disabilities but also age, less than legal minimum wages, so-called "commensurate wages," based on their actual level of output compared to an experienced worker performing "essentially the same type, quantity and quality of work" (U.S. Department of Labor Wage and Hour Division, 2008, n.p.). The Fair Labor Standards Act, 29 CFR Part 525 section 14(c), allows employers to measure workers' output against an experienced worker for an essentially identical task, and then pay a percentage of the prevailing local wage corresponding to the share of what the benchmark, worker can produce in the same amount of time.

Definition of such standards depends on the various types of output workers can be employed to work up, via whatever new process innovations emerge from day-to-day. The DOL-WHD will recognize productivity norms set "through an accepted method of industrial work measurement," including but not limited to "stopwatch time studies, predetermined time systems, or standard data or other recognized [but unspecified] measurement methods" (U.S. Department of Labor Wage and Hour Division, 2008, n.p.). These standards must include every aspect of work performed, but may not include "[b]ehavioral factors" including "personal appearance and hygiene, promptness, social skills, willingness to follow orders, etc." (U.S. Department of Labor Wage and Hour Division, 2008, n.p., emphasis in original). If, given all these constraints, a worker with disability produces less than an experienced non-disabled worker, the employer can legally pay less, even if that ends up below federal minimum wage. What this demonstrates is recognition of productivity at law based on definitions that include "etc." Or "an" acceptable method which can include "other recognized" methods not stated here, which are defined by the employer and then defended before the DOL-WHD (2008). The federal legal definition of 'productivity' is open-ended and subjective but powerful enough to override minimum wage law.

Definition of 'productivity' remains diverse despite claims to standardization.

This also demonstrates that corporate definitions of productivity will be inherently diverse depending on specific output or procedures; thus popular or 'one-size fits all' definitions in the business literature may not only indicate inadequate peer review, but would only apply to particular industries or products as defined by DOL-WHD (2008). Therefore this review will reference no definitions of productivity from the corporate sector. Academic experts show no more agreement but at least those precedents are juried and several canonical precedents underlie the selection of measurement methods attempted in the present investigation. Neoclassical, macroeconomic definition of productivity has become somewhat standardized, but consensus is not unanimous. Brynjollfson and Hitt (2003) demonstrate a typical Cobb-Douglas production function-based factor growth accounting model they attribute to Berndt (1991) and consider "the standard" framework for defining productivity (p. 6). The problem with this is that such reductions lump workers with disabilities into an opaque factor "labor" as if all labor was identical. This is in fact one source of the problem this research aims to explore: Considering labor as an averaged factor overlooks foregone potential productivity from the least-performing units within the averaged, aggregate factor Cobb-Douglas-type production functions simply sum into "labor," which supposedly explain productivity alongside capital and various factors authors include to explain wage or population growth, or innovation for example.

Felipe and McCombie (2001) describe specific criticisms of the prevailing explanation that defining productivity is as simple as the aggregate production functions many authors describe as authoritative (e.g. Brynjollfson and Hitt, 2003). The "Cambridge Capital Theory" and "Phelps Brown Critique" argued the Cobb-Douglas production function relies on a tautology -- basically an accounting identity defining the final value of output as the sum of the value of the inputs, including labor; those criticisms have so far survived complete rebuttal (H. A. Simon, qtd. In Felipe and McCombie, 2001, p. 28). Bernard (2000) set out a common argument all such explanations in the social sciences may rely on similar circular definitions (p. 52). The widespread acceptance that this "neoclassical model" perfectly explains productivity as the value of labor plus capital services adjusted for the 'Solow residual' (innovation), embodied into Cobb-Douglas or similar production functions, may be too parsimonious if required assumptions remain unjustified; other explanations deliver consistent accuracy without employing such production functions at all, Felipe and McCombie (2001) pointed out (p. 27). This research attempts to identify potential productivity improvements for a specific segment within that aggregate, averaged factor. Therefore even if the widely-accepted Cobb-Douglas / aggregate production function definition of "productivity" was not undermined by Phelps Brown or Cambridge critiques, such an aggregate definition would not describe the specific increments this inquiry seeks to investigate. This canonical definition of macroeconomic "productivity" would not work for this purpose even if perfectly accurate, which proponents have apparently failed to prove (Felipe and McCombie, 2001), and which is not used to define legal U.S. pay rates (U.S. Department of Labor Wage and Hour Division, 2008).

Factors within such aggregate definitions seem important to some experts.

Other authors explore factors such abstract, production function-type models internalize into the definition of productivity without attempting to explain. Koopman, Pelletier, Murray, Sharda, Berger, Turpin et al. (2002) consider absenteeism and a variant of absenteeism, "decreased presenteeism," which they define as "decreased productivity and below-normal work quality" when the worker is on the job. The "standard" framework (Brynjollfson & Hitt, 2003, p. 6) just internalizes factors like workplace environment and training or worker health and well-being into a coefficient defining labor productivity (Koopman, et al. p. 14). Mount, Ilies and Johnson (2006) for another example found that discretionary "counterproductive work behaviors" (p. 591) correlated with particular personality traits using confirmatory factor analysis (p. 605). Shibutani's classic 1978 study reported potential counterproductive effects of demoralization that ultimately resulted in violent insubordination and suicide in the World War II-era U.S. Army that demonstrate potential extremes of the opposites of productivity and job satisfaction, and similar demoralization appears today in the population of interest (below).

What these contrasting examples begin to demonstrate is first that reviewing every juried definition of productivity here is impossible, but also that although some experts present certain models as authoritative (e.g. Brynjollfson & Hitt, 2003, p. 6), despite that stance, other equally qualified experts define productivity much differently, with defensible method and results. The tactic is to prove disagreement, instead of attempting to defend one favorite model as if it were the dominant paradigm as some attempt. "To understand what happens in a demoralized unit would require getting at its component primary groups to ascertain just how the participants view the situations in which they are involved," Shibutani explained (1978, p. 14), and so while there is a widely accepted neoclassical definition of aggregate productivity, that is inadequate for explaining productivity at the level of individual workers, which this study aims to investigate, of which the aggregate explanations are summations. Examples such as Mount, Ilies & Johnson (2006) or Koopman, et al. (2002) demonstrate that different experts measure productivity in multifaceted and varying ways. The current study hopes to contribute to, rather than solve, the problem of measuring the complex construct 'productivity.' Demonstrating recent experts contradict each other helps justify minor innovations to existing precedent where so many examples comprise a vast, complementary and expanding literature.

Evidence Suggests Potential Interaction Between ADA, Productivity And Satisfaction

Some experts attribute ADA for reduced employment for workers with disabilities, and there is clear evidence some programs may support or encourage marginalization or total withdrawal from labor force participation. DeLeire (2000) argued the accommodation mandate in ADA raised the cost of employing workers with disabilities, which "caused" (p. 23) higher unemployment for those labor force participants. Acemoglu and Angrist (1998) went to great length to suggest ADA as a "likely cause" (p. 949) for declines in employment for workers with disabilities aged 21-39, and controlled for firm size below typical definitions of small-to-medium employers (SMEs) as 500 employees or less, defining small employers as 24 employees or fewer since the second phase of the original ADA rollout applied to 25 workers or more. Acemoglu and Angrist (1998) considered employment incidence rather than productivity and satisfaction, and so the results are precedential for the current research only in sorting by ADA firm size.

Hotchkiss (2002) on the other hand claimed that a reduction in labor force participation by potential workers with disabilities rather than lower employment per se debunked both these specific findings (p. 9). Employment adjusted for labor force participation increased except in recession years after ADA, Hotchkiss countered (2002, p. 10). Stapleton and Burkhouser (2004) presented other evidence suggesting ADA had different effects in different states, many of which already prohibited employment discrimination before ADA (p. 630), but also because of changes to the structure and amount of disability unemployment support under Social Security Disability Insurance (SSDI) programs around the time of ADA (p. 629-630). What this dispute between experts resolves is that there is a gap in information definitively explaining the effects of ADA Title I, which the new May 2011 regulations may likely spark off anew. What has not been debunked is evidence SSDI and Medicaid disability transfers often carry perverse incentives that affect labor force participation and unemployment, and thus likely satisfaction and productivity, which then also likely affect labor supply decisions before and after successful job placement.

Policy disincentives probably affect productivity, satisfaction and employment.

Where consensus agrees is around a strong disincentive to work if medical costs covered by Medicaid exceed the level of income qualifying them for SSDI reimbursement. As numerous experts, administrators and disability employment program consumers testified to the 111th U.S. Congress in 2009 (U.S. Congress, 2011), once an individual earns more than a threshold that qualifies them for Medicaid coverage, they have to pay their medical costs out of pocket, and if those costs are more than the new earnings plus the SSDI transfer income, then the result is negative earnings plus often considerable effort and expense getting to work along with the labor of work itself. The result, not surprisingly, is often that potential workers with disability live off $674 per month income support in order not to lose Medicaid eligibility by earning more than qualifies them for federal health care coverage, i.e. $940 in one month (C. Bates-Harris, qtd. In U.S. Congress, 2011, p. 23-25), if total earnings become less or negative covering medical costs out of pocket, especially given exclusion from insurance for the pre-existing condition that justified Medicaid coverage in the first place before the Patient Protection and Affordable Care Act (PPACA). PPACA made such exclusion illegal, but the results are still too new for empirical analysis as yet. The perverse incentive generated by high-enough out-of-pocket medical costs meant that a potential worker with disability had to go from earning little enough to qualify for Medicaid, to enough that they could cover those costs out of pocket and also the foregone monthly income transfer. This might often mean many thousands of dollars per year or month if disability required ongoing medical attention, a situation experts often call the "Cash Cliff" (Tremblay, Porter, Smith and Weathers, 2011, p. 19) due to the abrupt income threshold.

Extensive testimony to Congress (2011) described problems within SSDI programs themselves. Income verification requirements where employment was successfully accomplished, for example, resulted in overpayment and then reversal of awarded transfers that left workers with obligations to reimburse SSDI for in one case $115,000 where a worker with psychiatric disability had benefits retroactively revoked for the prior six years, for "sporadically, very occasionally exceeding the substantial gainful activity level by small amounts, due to his disability, and there is no dispute that he reported his work attempts" (Landry, Anderson, Lacava and Bronstein, qtd. In 111th Congress, 2011, p. 88). Another was overpaid $60,000; another over $56,000; none of these individuals have worked since, which their program administrators attributed to their