The Dynamics of Disability, Work

and Subjective Well-being in

Australia

Melanie Jones, Kostas Mavromaras, Peter

Sloane and Zhang Wei

Research Seminar, 20th June 2019, National Institute of

Economic and Social Research, London

Conservative Party Manifesto 2015

We aim to halve the disability employment gap

by transforming policy, practice and public

attitudes, so that hundreds of thousands more

disabled people who can and want to be in work

find employment.

Conservative Party Manifesto 2017

We will get 1 million more people with disabilities

into employment over the next ten years

Introduction

• Growing evidence on relationship disability and labour market outcomes – mainly cross sectional data.

• Interest ‘gap’ in outcomes

• Ability adjust for observable characteristics (age; education)

• Attempts identify discrimination. • Problem unobserved influences.

• Policy evaluation

• Disability is dynamic and this can be used to improve our understanding of labour market disadvantage.

Longitudinal Evidence

• Dynamics of self-reported disability itself (Burchardt, 2000)

• Causal influence of disability (Gannon, 2005; Oguzoglu, 2010)

• Tracing how the disadvantage varies depending on the

dynamic trajectory of disability (Jenkins and Rigg, 2004;

Charles, 2003; Meyer et al., 2008; Jones et al., 2013; Meyer

and Mok, 2019).

Disadvantage

• Employment and earnings (Charles, 2003; Meyer et al.,

2008; Jones et al., 2013; Meyer and Mok, 2019)

• Annual income, consumption, poverty (Stephens, 2001;

Meyer and Mok, 2019)

• Divorce (Singleton, 2012)

• Life satisfaction

– Adaption to life events (unemployment, marriage/divorce, child

birth) (Clark et al., 2008)

– Disability (Oswald and Powdthavee, 2008; Powdthavee, 2009)

• Adaptation to ‘mild’ disability

• New evidence on the change in labour market outcomes at

disability onset for Australia (HILDA) • National Disability Insurance Scheme

• Multiple measures of dynamics including explicit consideration

of disability exit and severity.

• Considers broader impact on life satisfaction.

Aims

• Annual survey of private households (about 8,000 households)

• Longitudinal/panel design – follow individual

• Rich information on variety of life domains

• HILDA waves 1-13 (2001-2013)

• Working age individuals with a minimum of 4 responses

• About 12,600 individuals

• 116,000 person-year observations

Household, Income and Labour Dynamics in

Australia (HILDA)

• Work-limiting definition of disability: • “Do you have any long-term health condition, impairment or

disability that restricts you in your everyday activities, and has

lasted or is likely to last, for 6 months or more?”

• “Does your condition limit the type of work or the amount of

work you can do?”

• 13.3 per cent of observations

• Indicator of severity • “Could you pick a number between 0 and 10 to indicate how

much your condition limits the amount of work you can do?”

• 6.2 per cent ‘severely’ disabled

• Nature/type

Disability

• Definition 1: Consistent onset or exit (Jones et al., 2013) • Always with a disability in the sampling frame

• Never with a disability in the sampling frame

• Consistent onset: experienced onset without exit

• Consistent exit: experienced exit without a further onset

• All other patterns of disability within the sampling frame.

• Definition 2: Chronicity and severity of onset (Meyer and Mok,

2019) • One-time: once in the sampling frame

• Temporary: two or three instances in the sampling frame

• Chronically disabled: four or more instances in the sampling

frame

• Further distinguish between chronic not severe and chronic

severe

Disability Dynamics

Total

Cases %

Continuously disabled 506 4.0

Continuously non-disabled 8,823 70.6

Consistent onset 228 1.8

Consistent exit 268 2.1

Irregular 2,679 21.4

Total 12,504 100.0

Total

Cases %

One-time disabled 661 30.2

Temporarily disabled 620 28.3

Chronically disabled (not severe) 403 18.4

Chronically disabled (severe) 507 23.1

All onset 2,191 100.0

Definition 1:

Definition 2:

Disability Dynamics

ILO employment (activity last week)

• Gap is pronounced at 36.6 percentage points (82.0% for

non-disabled compared to 45.4% for disabled)

Usual weekly hours

Subjective well-being

“All things considered, how satisfied are you with your life?”

Responses 11 point scale: 0 (least satisfied) and 10 (most

satisfied)

• Gap 0.8 index points (10%)

Facets

Disadvantage

Event Study Methodology: Charles (2003) and

Meyer and Mok (2008)

𝑌𝑖𝑡 = 𝛼𝑖 + 𝛾𝑡 + 𝑋𝑖𝑡𝛽 + 𝛿𝑘𝑔𝐴𝑘𝑖𝑡𝑔

𝑘𝑔 + 𝜀𝑖𝑡

𝑌𝑖𝑡 = measure of employment or life satisfaction 𝛼𝑖 = individual fixed effects

𝛾𝑡 = time period fixed effects (year of interview)

𝑋𝑖𝑡= controls for observable time varying personal characteristics (age, age squared, education level, marital status, children, urban/rural)

𝐴𝑘𝑖𝑡𝑔

is a dummy variable which equals 1 if in year t individual i belongs

to onset group g and he/she is k years from onset (a minus indicates prior to onset).

𝛿𝑘𝑔 measures the influence of group g disability k years away from onset,

relative to that more than 3 years pre-onset.

Year from onset/exit Definition 1

Consistent onset Consistent exit

Coef. S.E. Coef. S.E.

-3 -0.068* (0.04) 0.159** (0.08)

-2 -0.060 (0.05) 0.100 (0.08)

-1 -0.114** (0.05) 0.166** (0.07)

0 -0.344*** (0.05) 0.251*** (0.08)

1 -0.359*** (0.06) 0.251*** (0.08)

2 -0.399*** (0.05) 0.284*** (0.08)

3 -0.411*** (0.05) 0.274*** (0.08)

4 -0.400*** (0.05) 0.275*** (0.08)

5 -0.444*** (0.06) 0.296*** (0.09)

6 -0.465*** (0.06) 0.282*** (0.09)

7 -0.440*** (0.06) 0.261*** (0.09)

8 -0.460*** (0.06) 0.269*** (0.09)

9 -0.412*** (0.06) 0.252*** (0.10)

10+ -0.406*** (0.07) 0.292*** (0.10)

No. of observations 102,382 12,073

The Dynamic Effect on Employment

Year from onset/exit Definition 2

One-time Temporary Chronic non-severe Chronic severe

Coef. S.E. Coef. S.E. Coef. S.E. Coef. S.E.

-3 -0.039** (0.02) -0.015 (0.02) -0.021 (0.03) -0.056* (0.03)

-2 -0.045** (0.02) -0.020 (0.02) -0.024 (0.03) -0.042 (0.03)

-1 -0.045** (0.02) -0.017 (0.02) -0.020 (0.04) -0.076** (0.03)

0 -0.067*** (0.02) -0.063*** (0.02) -0.072** (0.04) -0.270*** (0.04)

1 -0.020 (0.02) -0.053** (0.02) -0.086** (0.04) -0.266*** (0.04)

2 -0.036* (0.02) -0.030 (0.02) -0.077** (0.04) -0.297*** (0.04)

3 -0.023 (0.02) -0.012 (0.02) -0.059 (0.04) -0.310*** (0.04)

4 -0.021 (0.02) -0.036 (0.03) -0.065* (0.04) -0.273*** (0.04)

5 -0.003 (0.02) -0.009 (0.03) -0.056 (0.04) -0.325*** (0.04)

6 -0.011 (0.02) -0.009 (0.03) -0.070* (0.04) -0.343*** (0.04)

7 -0.011 (0.02) 0.006 (0.03) -0.081** (0.04) -0.318*** (0.04)

8 -0.035 (0.03) 0.014 (0.03) -0.080* (0.04) -0.339*** (0.04)

9 -0.017 (0.03) 0.038 (0.04) -0.098** (0.05) -0.344*** (0.05)

10+ 0.048 (0.03) -0.027 (0.04) -0.105** (0.05) -0.360*** (0.05)

No. of observations 102,382

The Dynamic Effect on Employment

The Dynamic Effect on Employment

Year from onset/exit Definition 1

Consistent onset Consistent exit

Coef. S.E. Coef. S.E.

-3 -0.163 (0.16) -0.050 (0.31)

-2 -0.213 (0.15) 0.145 (0.26)

-1 -0.197 (0.16) 0.068 (0.25)

0 -0.858*** (0.20) 0.153 (0.24)

1 -0.679*** (0.19) 0.084 (0.26)

2 -0.798*** (0.18) 0.229 (0.25)

3 -0.899*** (0.19) -0.055 (0.27)

4 -0.857*** (0.20) 0.177 (0.27)

5 -0.824*** (0.23) -0.073 (0.28)

6 -0.864*** (0.21) -0.055 (0.29)

7 -0.936*** (0.24) -0.165 (0.30)

8 -1.418*** (0.28) -0.032 (0.31)

9 -1.028*** (0.26) -0.068 (0.32)

10+ -0.691** (0.31) -0.144 (0.32)

No. of observations 102,400 12,072

The Dynamic Effect on Life Satisfaction

Year from onset/exit Definition 2

One-time Temporary Chronic non-severe Chronic severe

Coef. S.E. Coef. S.E. Coef. S.E. Coef. S.E.

-3 0.007 (0.06) -0.082 (0.07) 0.004 (0.12) -0.071 (0.12)

-2 -0.079 (0.06) -0.158** (0.07) 0.016 (0.11) -0.108 (0.12)

-1 -0.074 (0.06) -0.198*** (0.07) -0.040 (0.11) -0.136 (0.12)

0 -0.292*** (0.07) -0.379*** (0.08) -0.241** (0.12) -0.635*** (0.14)

1 -0.091 (0.07) -0.320*** (0.07) -0.039 (0.12) -0.618*** (0.13)

2 -0.023 (0.06) -0.253*** (0.08) -0.019 (0.11) -0.586*** (0.13)

3 -0.035 (0.06) -0.214*** (0.08) -0.172 (0.12) -0.677*** (0.14)

4 0.008 (0.06) -0.241*** (0.08) -0.102 (0.12) -0.612*** (0.14)

5 0.100 (0.07) -0.192** (0.08) -0.057 (0.13) -0.673*** (0.15)

6 -0.015 (0.08) -0.258*** (0.10) -0.168 (0.13) -0.689*** (0.15)

7 0.045 (0.08) -0.276*** (0.10) -0.226* (0.14) -0.705*** (0.17)

8 -0.029 (0.09) -0.187* (0.11) -0.194 (0.13) -0.891*** (0.16)

9 0.092 (0.10) -0.299** (0.12) -0.253* (0.15) -0.715*** (0.19)

10+ -0.060 (0.13) 0.041 (0.11) -0.188 (0.14) -0.650*** (0.16) No. of observations 102,400

The Dynamic Effect on Life Satisfaction

• The home in which you live

• Your employment opportunities

• Your financial situation

• How safe you feel

• Feeling part of the community

• Your health

• The neighbourhood in which you live

• The amount of free time you have

Facets of Life Satisfaction

Facets of Life Satisfaction – consistent onset

Facets of Life Satisfaction – consistent exit

Conclusions

Employment • Effects of consistent onset and exit – considerable magnitude

(and persistent)

• Chronicity matters

• One time and temporary disability have no long-lasting

employment effects

• No improvement for chronic severe disability

Life Satisfaction • Negative consistent onset effects – no adaptation/no exit effects

• One time disability has no long-lasting effects

• No adaption to chronic severe disability

• Facets provide insights into the channels through which disability

influences life satisfaction

Conclusions

Policy Implications • Heterogeneity in disadvantage – importance of chronicity and

severity – tailored support?

• Asymmetry life satisfaction – policy support post disability exit?

Extensions • Other outcomes (income; disability benefits)

• Impact on the household (labour supply spouse; divorce)

• Age of onset

• Limitations arising from mental versus physical health problems

The Dynamics of Disability, Work

and Subjective Well-being in

Australia

Melanie Jones, Kostas Mavromaras, Peter

Sloane and Zhang Wei

Research Seminar, 20th June 2019, National Institute of

Economic and Social Research, London