Articles
Feature Article
- The price of exclusion : the economic consequences of excluding people with disabilities from the world of work
ILO (International Labor Organisation) Employment Working Paper No. 43
A summary:
We hear a lot about the costs of inclusion of people with disabilities - pensions, subsidies, services, access etc - but hardly anything about the costs of exclusion.
The following report estimates the costs of exclusion from the world of work as between 3-5% of GDP:
http://sebastian.buckup.de/4.html
While this study looks at ten low to middle income countries, the percentage is probably higher for countries like Australia.
The current GDP of Australia is just on 1 trillion dollars ($1,000,000,000) so using the (probably low) 3-5% estimate of this report gives the cost of exclusion in Australia as between $30 and $50 billion - per annum!!! That's right, it costs the Australian economy between 30 and 50 billion dollars every year to sustain the exclusion and discrimination that is the day to day reality of many people with disabilities.
Now imagine if $30-50 billion was available - every year - to INCLUDE people with disabilities in the world of work in Australia.
How did the report come up with this figure? With a lot of extrapolation, mathematical formulas, statistical research and serious summations of the variability of data collection from the countries surveyed. The formula used to calculate the economic losses related to disability looked at accumulated productivity losses related to different forms of exclusion. It multiplied the average productivity of a person in the given country with the number of people of working age who have a disability, with the disability level and a productivity adjustment factor for that disability level. Building this product for all available disability levels and adding them up yielded the economic losses related to disability!
This study developed and pilot-tested a new approach for quantifying the macroeconomic
losses related to the exclusion of people with disabilities from the world of work. After a
discussion of a baseline approach published by the World Bank in 2000 (Metts, 2000), it
created a formula to calculate “the price of exclusion” .The formula consists of three elements: the first one reflects the reduced productivity of employed people due to lower education, a lack of transport and physical accessibility, etc. This part does not suggest that changes in the environment can lift the productivity of people with disabilities to population average, but it suggests that changes in the environment may narrow the gap between the actual and the potential productivity level of a person at a given disability level. The second part of the equation takes into account the higher unemployment rate among people with a disability compared to those reporting no disability. The third part finally takes into account the higher labour market inactivity rates among people with a disability compared to those reporting no disability. Together these three elements sum up to the accumulated economic losses related to disability. The study applies the approach to a selection of ten low and middle-income developing countries, three of which are in Asia (China, Thailand, and Viet Nam), and seven in Africa (Ethiopia, Malawi, Namibia, South Africa, Tanzania, Zambia and Zimbabwe). It comes to the
conclusion that economic losses related to disability are large and measurable, falling into a band between 3 and 5 per cent of GDP. The study has not undertaken the effort of extrapolating the figures of the ten country cases to a global level. This would require additional country studies in regions that have been left out here (Europe, Latin America, and North America), as well as a deeper examination of appropriate extrapolation approaches. The most important result of this study is that it is possible to generate country level data on the costs of exclusion. Even for countries where reliable primary data are generally scarce, the combination of reasonable assumptions and adequate modelling can generate findings that are more robust than those generated by a global extrapolation approach. However, the testing of this new methodology of calculating economic losses related to the exclusion of people with disabilities from the world of work has also revealed important open questions which future work needs to address. The following recommendations were made to develop the study further:
1. This study distinguishes potential and actual productivity of people with disabilities. This is useful to indicate that people with disabilities are less productive not because they are “disabled” but because they live and work in environments that are “disabling”. This is of crucial importance to the message the analysis wants to transmit: it makes economic sense to create an environment that is supportive for people with disabilities. So far, however, the concept of actual and potential productivity is under-theorized and the productivity differentials (‘betas’) used in this study need stronger empirical foundations. Also, it could be seen as problematic that these differentials are assumed equal for all countries. Future works need both to improve the understanding of the concept and to generate simple measures that allow for an estimation of the productivity–potential gap at country level.
2. This study has been struggling to a great degree with data derived from incomparable ways of measuring disability prevalence rates, as well as different ways of measuring the level of disability. The biggest roadblock in calculating the economic consequences of unequal opportunities among people with and without disabilities is the lack of reliable, comparable primary data. In close cooperation with its constituents, the ILO should intensify its efforts to build a more profound stock of knowledge on the labour market situation of people with disabilities. The ILO should also continue to work in cooperation with the UN Washington Group to intensify worldwide implementation of the standardized set of questions in surveys and censuses.
3. Often it is not only a lack of primary data that makes it difficult to analyze labour market and productivity impacts of disability. The way existing data are compiled and published is also problematic: many statistical offices provide one general disability prevalence rate for their country but fail to offer in addition a disability prevalence rate for the working age population. Furthermore, many surveys potentially allow for the cross-referencing of disability and unemployment rates; yet, calculations of this kind are rarely published. In the same vein, many surveys allow for some conclusions on the level of disability in a country (at least the more recent ones, which use the ICF framework and the Washington Group questions) but they do not make use of this information. So, in addition to advocating for more and better data, the ILO should develop a guideline to support National Bureaus of Statistics and other organizations in compiling more valuable statistics from the data they generate in their surveys.
4. Finally, it is strongly recommended that the ‘naked figures’ offered in this study be interpreted against their country context to make more sense of similarities and differences. Furthermore, the analysis carried out here should be extended to a larger array of low-, middle- and high income countries across all regions. Only this will generate the necessary information to arrive at a credible global estimate of costs related to the exclusion of people with disabilities from the world of work.
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Our mission is to increase employment opportunities for
people with disabilities and from diverse backgrounds
in Australia. For those of you who are not aware we were
officially formed on September 7, 2005 at Victorian Council
of Social Services (VCOSS).
ADDE promotes pro-active employment
policies and practices for disadvantaged groups including
people with disabilities, mature age workers, people from
culturally and linguistically diverse backgrounds as well
as indigenous people. People who fall into more than one
of these categories are recognised as being even more
disadvantaged. Therefore, we see a greater need for a
change of attitude and awareness.