Is the ADA Efficient?

Abstract

The Americans with Disabilities Act (ADA) is a significant legal intervention designed to improve outcomes for people with disabilities. In this article, I use an informal model of worker-firm matching as an organizing framework to explore the economic effects of disability discrimination law in the workplace. The framework shows how the presence of individuals with disabilities in the labor market creates precisely the conditions - incomplete and asymmetric information - that can lead to inefficient mismatching, employee churning, and In contrast to the conclusions of more conventional economic analyses, I argue that the statutory duty of reasonable accommodation promotes labor market efficiency by combating churning and scarring. The duty to accommodate constrains employers whose private gains from discharging disabled employees often produce social losses which are borne by other employers and by public disability insurance schemes. The framework thus sheds new light on how disability discrimination law influences labor market efficiency. It is important to remember that arguments based on distributive justice and the dignitary interests of people with disabilities have always been - and will no doubt remain - a critical part of the policy debate. Nevertheless, an efficiency defense of accommodation mandates bolsters these non-economic arguments offered in support of the ADA. It also challenges the conventional conclusion that a statutory duty of accommodation most closely resembles an implicit tax and transfer scheme with purely redistributive effects. My analysis of comparative accommodation costs also illustrates some areas of tension between dignitary and efficiency approaches to accommodation. We can pursue complete freedom of choice for individuals with disabilities only if we are willing to compromise significantly the economic objective of matching. By identifying more clearly the diverse ways in which accommodation promotes both economic and non-economic goals, we can hope that legal doctrine will tend to express a more orderly balancing of these values.