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Do disability laws impair firm performance? (Bird & Knopf 2010)

Citation

Bird, R., & Knopf, J. (2010). Do disability laws impair firm performance? American Business Law Journal, 47(1), 145-190.

Highlights

    • The study’s objective was to examine the effect of state disability laws—those related to antidiscrimination and reasonable accommodation for employees with disabilities—on commercial banks’ number of full-time equivalent employees and their average salary.
    • The authors estimated the impact of antidiscrimination and reasonable accommodation laws using a differences-in-differences regression model with state- and year-fixed effects. Data were obtained from the Federal Reserve Bank of Chicago’s Commercial Bank Database and from Global Insight.
    • The study found that neither antidiscrimination nor reasonable accommodation laws had a statistically significant effect on bank employment levels during the year the law went into effect or during the subsequent three years. Antidiscrimination laws led to a statistically significant 1.3 percent decline in bank employees’ average salary in the third year after enactment, but not in any other time period.
    • The quality of causal evidence presented in this report is low. This means we are not confident that the estimated effects are attributable to state disability laws. Other factors are likely to have contributed.

Intervention Examined

State Disability Laws

Features of the Intervention

Antidiscrimination laws are those that prohibit employers from discriminating against applicants or employees on the basis of disability. Reasonable accommodation laws require that employers provide reasonable accommodations to help employees with disabilities complete the functions of their jobs, provided the accommodations do not impose undue hardship on the employer. Reasonable accommodations may include adjusting work schedules or equipment, providing qualified readers or interpreters, or modifying facilities to improve accessibility. States differ in how they define disability. By 1980, 38 states had enacted antidiscrimination laws and by 1990, almost all states had enacted such laws. Most also had some form of reasonable accommodation provision by 1990.

Features of the Study

This study examined the effect of state antidiscrimination and reasonable accommodation laws for employees with disabilities at commercial banks in all 50 U.S. states from 1976 to 1988. The authors estimated a differences-in-differences regression with state- and year-fixed effects to measure the impact of state disability laws on the number of full-time equivalent employees and the average salary at the firm. Average salary was calculated as total salary plus bonuses paid divided by the number of full-time equivalent employees. The study looked at the effect of states having both antidiscrimination and reasonable accommodation laws and those having only antidiscrimination laws relative to having neither type of law. The authors considered effects at five points in time: the year before the relevant law went into effect, the year the law went into effect, and each of three years after the law went into effect. The authors estimated separate regressions for each outcome variable for each of these points in time. Control variables included time trends by state, an indicator for interstate banking legality, gross state product, and one- and two-year lagged values of the dependent variables.

To be eligible for inclusion in the study, banks must have reported 21 or more full-time employees and complete observations in all sample years. The number of banks in the sample ranged from 5,010 to 8,512 across sample years. Data on banks came from the Commercial Bank Database curated by the Federal Reserve Bank of Chicago. Data on state economic factors were obtained from Global Insight, a private firm.

Findings

    • The study found that neither state antidiscrimination laws nor state reasonable accommodation laws had a statistically significant effect on commercial bank employment levels at any time from 1976 to 1988.
    • Antidiscrimination laws led to a statistically significant 1.3 percent decline in bank employees’ average salary in the third year after enactment, but not in any other time period.

Considerations for Interpreting the Findings

The authors did not control for average characteristics of banks’ employees, such as disability status, gender, or race, and thus did not establish baseline comparability of banks that were and were not covered by state disability laws. If banks’ workforce profiles differed systematically across states, the outcomes of treatment and comparison banks might have reflected differences in workforce characteristics in addition to the effect of state disability laws.

It is also important to note that the authors conducted five regression analyses for each of four outcome variables without controlling for multiple comparisons. Performing multiple statistical tests on related outcomes makes it more likely that some impacts will be found statistically significant purely by chance and not because they reflect program effectiveness. Thus the statistical significance of the average salary finding is likely overstated.

Causal Evidence Rating

The quality of causal evidence presented in this report is low. This means we are not confident that the estimated effects are attributable to state disability laws. Other factors are likely to have contributed.

Reviewed by CLEAR

October 2015

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