Lord Freud’s comments that some disabled people were “not worth” paying the full minimum wage – that they are somehow worth less than others – have caused widespread offence. But by bringing the issue of employment for people with disabilities to the top of the news agenda, some good may yet come of it.
There are long-running issues here that successive governments have not been able to overcome. The employment rate for working-age people with a disability in the UK has been persistently lower – by around 30% – than the employment rate for those without disability. Rates of poverty are also higher among people with disability and their families. The bottom line is that we need to improve access to work for people with disability.
The employment gap partly reflects barriers to work relating directly to physical or mental impairments, although these are only disabling to the extent that the physical and social environment makes them so (think wheelchairs and steps in the workplace). It also reflects other labour market disadvantages facing many people with disability, who are disproportionately older, less well qualified and live in parts of the country with fewer good jobs.
But if disability is not an immutable state then policies can be put in place to open up employment options to people with impairments. Granted it’s not easy. Even policies such as the Disability Discrimination Act may have had unintended consequences for employment because of employer concerns about additional costs.
Reforming disability benefits similarly entails a difficult trade-off between incentivising and supporting people with disability into work, while providing a decent safety net for those currently unable to work, or unable to find work. Get it wrong and you can reduce the level of financial support offered without enough movement into sustainable employment. This will only exacerbate poverty among people with disability and their families.
Where Lord Freud was wrong
This brings us back to Lord Freud. Some workers, for example those with higher qualification levels, are worth more in the labour market than others because firms are willing to pay more to employ them. The minimum wage already reflects this with lower rates for younger workers and those in training.
But setting lower minimum wage rates for people with disability is unlikely to be the answer to the employment gap they face. Even paying direct subsidies to employers rather than topping up lower wages for disabled workers would have the same employment-promoting effects without the same negative connotations.
There are other – arguably better – ways to get more people with disability into work. In particular, for those individuals who develop impairments while employed, keeping them in a job, ideally with their existing employer, is likely to be preferable and far easier than getting them back into sustainable work after a lengthy spell out of it, perhaps claiming benefits. Employment rates for people with disability are low both because too few enter and too many exit work.
How it could work
Here we can look to other countries for inspiration. The Netherlands, for example, requires employers to bear full responsibility for an employee’s sick pay for two years following a health shock or disability onset. During this time they must allow workers to remain with the firm unless they refuse to co-operate in a reasonable work-resumption plan.
Employers must also offer rehabilitation activities and take reasonable steps to accommodate the needs of workers to help them remain in their job or to find alternative employment within the firm. Only when the two years are up do workers become eligible to apply for long-term disability benefits, which are funded through experience-rated employer premiums (so employers sending proportionally more workers onto long-term disability benefits pay more).
It’s early days for these reforms, but initial indications suggest they are making a positive difference in the Netherlands. Maybe these kinds of measures, coupled with practical and financial support for affected employers, could also make a positive difference here?
Lord Freud has apologised for the suggestion that wages of £2 per hour might be appropriate for some disabled workers. But at least he’s got us talking, as reform is needed to open up the workplace to more working-age people with a disability.