Disability and the Labor Market in Latin America
By Gonzalo Hernández Licona, Department of Economics, ITAM (paper submitted to the annual conference of the Inter-American Development Bank, Chile, March 2001)
1. Introduction
Not a very promising start: the information
At the beginning of this paper, we engaged ourselves in searching extensively for information on disabilities and its relationship with economics, specifically with the labor market. We started the search in the biggest bookshops in Washington, D. C. with incredible poor results. No one knew exactly under which area of the bookshop this topic should be found, and after looking in the social sciences section, in the economics section, in the sociology section and in the family behavior section, we found only three books on disabilities in the psychology area. All the books were about the experience of being disabled; I found nothing on disabilities and economics.
Even though we found later on some (not much) information on this topic, the first finding of the research was that, despite the fact that the United Nations Development Program (UNDP) estimated that approximately 10% of the population is disabled, the information on this topic is almost negligible. Furthermore, things look even worst in Latin America. That is why one of the most important objectives of the paper is simply to convince the reader that, in order to get both a better understanding of disabilities and better policies to solve the problem, we need to have better data on this issue for Latin America.
Not a very promising second step: the definition
A second problem we faced (and finally another immediate result form this research) was that although disability is a relatively easy concept to understand, there are various terms in English and Spanish (and even in Portuguese) that do not relate exactly to the same problem. This problem affects substantially the estimation of the incidence of disability and therefore, the analysis of its relation with the labor market, which is the aim of the present research. Another logical conclusion of this paper is therefore the need to define better the concept of disability internationally, in order to be sure that we are measuring the same problem in every year and in every country in Latin America.
There are very few official definitions for disability in the literature, in the legislation and in the regulations of any country. In fact, differences in the use of the Spanish language across Latin America and the change of terms to refer to disability over time, makes the concept more difficult to apprehend. In Mexico and Costa Rica, the word "invalidez" and "discapacidad" refer to disability, while "incapacidad" refers to a temporary illness or injury. The term "discapacidad" is more politically correct than "invalidez". In other Latin American countries, the term "incapacidad" may refer to a permanent disability. Other words such as Ïlisiado", Ïimpedido", ÏparalÃtico", ÏminusvÝlido" and Ïparapl»jico" help a great deal to increase the confusion.
US Social Security under the Disability Insurance program defines disability as "the inability to engage in substantial gainful activity (SGA) because of physical or mental impairment". This is a purely occupational definition, which somewhat limits the concept. Livermore et al. (2000) offer a broader definition of disabled people, viewing them as "people with challenges that can be solved if appropriate policies and supports are available for addressing them".
The definition provided by Nagi (1991) identifies three principal components of disability. The first one being the presence of a pathology, defined as a physical or mental disorder, the second component being impairment, which Nagi defines as a mental loss or abnormality that limits a person's capacity and level of function. The third component of disability is the inability to perform or a limitation in performing socially expected roles and tasks".
Nagi's definition is more consistent with the parameters set forward by The World Health Organization in its International Classification of Functioning, Disability and Health (ICIDH-2), which has the purpose of providing a unified and standard language and framework for the description of health and health-related states. The ICIDH-2 provides qualifiers for four specific issues in human health: body functions, body structures, activity and participation and environmental factors. This is a relatively new scheme of classification and we still have to wait for its criteria to be included in the design of surveys and laws.
Disability in Latin America
Since there is no standard way of classifying disabilities, we usually have to work with the data produced by national social security systems across the region. There is no standard methodology across the countries' social security systems and thus, we have very little information about the total number of disabled individuals in the whole population. Furthermore, since many individuals in Latin America do not have access to Social Security, the universe of people with disabilities that can be analyzed from Social Security data is restricted to those individuals that have jobs in the formal sector of the economy.
Most estimates of the prevalence of disability in Latin America for the whole population come from sources such as the population censuses and household surveys. In Mexico, according to the XII Population and Housing General Census, year 2000 , the total number of individuals afflicted by some sort of disability is 2,241,043 persons, 2.31% of the total population. According to this data, 31.6% of the population with disabilities acquired this condition resulting from an illness; 22.7% became disabled as a result of problems related with old age; 19.4% was born with a disability and 1.9% owing to other reasons.
Montes (2001) estimates that Brazil shows 2.36% of disabled men and 1.46% of women. According to this author, in Nicaragua 17.12% of the males and 20.30% of the female population is disabled; in Costa Rica the percentages of disabled men and women are 6.09% and 5.76%, respectively.
This contrasts with the information from the UNDP in its 1997 Human Development Report that estimates a total of 8,870,000 persons with disabilities in Mexico, 15,533,100 people with disabilities in Brazil, 396,000 in Nicaragua and 326,700 in Costa Rica. This represents around 10% of the total population in each country. Metts (2000) used UNDP data and came to the conclusion that 10.10% of the population in high human development countries is disabled, while medium and low human development countries had 3.7% and 10% of disabled population, respectively.
Houtenville (2000) provides similar data for the United States using alternative definitions of disability and based on the March Current Population Survey for several years. Houtenville's estimated percentage of non-institutionalized civilians aged 25 through 61 with a disability for 1999 is 7.9% for those that have a work limitation while the percentage is 10.8% corresponds to those with a work disability. Houtenville explains the difference between both estimates in the following fashion: the work limitation is reported at the time of the survey while other categories of work disability are reported for the previous year.
The estimate of 7% to 10% is a commonplace in the disabilities literature; Elwan (1999) notes this and cites a 1995 ESCAP paper that concludes a prevalence of no more than 5% for the global population, due to the differing definitions and survey methodologies. It is important to mention that these estimates come from a wide variety of surveys with divergent methodologies. From them, we insist again that more and better information on disabilities should be generated in the years to come.
Data on the economic consequences of disability is even scarcer. According to Giuffrida, Iunes and Savedoff (2001), a study showed that the economic costs of occupational injuries and illnesses in the United States represents approximately 3% of GDP, while occupational accidents in developing countries may represent as much as 10% of GDP. According to Giuffrida et al., the rate of occupational injuries and diseases in Latin America and the Caribbean is high. Quoting the author, "the burden is likely to be heavier for those who can least afford it, such as those employed in informal activities where wages are lower, there are fewer opportunities for advancement, and compensation for occupational accidents and diseases is generally not available".
Because of the extent of the informal labor markets in the region, we can easily conclude that the economic consequences of disabilities (not only due to occupational hazards) are high and largely underestimated. The matter should concern developing countries as much as it worries its industrialized counterparts, since there seems to be a link between disability and poverty. According to Elwan (1999), disability adds to the risk of poverty, and conditions of poverty increase the risk of disability , as we will see later on.
The purpose of this paper
Taking into account the problems of the lack of information and the lack of a proper definition of disability in Latin America, this paper has two main objectives. The first one, as we said before, is simply to stress the need to increase the resources for a better understanding of the disabled population internationally, and more specifically in Latin America. Those resources will be mostly allocated in obtaining better household surveys and in helping to define the concept internationally.
The second objective is to analyze the relationship between disabilities and the labor market in Latin America, using the scarce available information generated by the household surveys of some Latin American countries. Despite the fact that the IADB has an important number of household surveys from many countries and years, we can only use three surveys for this research: the one from Brazil in 1981, from Nicaragua in 1993 and from Costa Rica in 1998. These were the only surveys in which we were able to estimate the incidence of disability for the whole population. In the other countries we know if a person is disabled only if he is not working, making these surveys impossible to use for our purposes.
In analyzing the relationship between disabilities and the labor market, we will be interested in estimating the following aspects:
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The incidence of disability in the population, dividing it by gender, age, schooling, marital status and position in the household. We would like to assess specifically the following hypothesis: the prevalence of disabilities increases with age, decreases with schooling (although the causality may be the other way around), and it might be higher for non-heads of the household, for single people and for poor families.
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The labor participation rate for the population divided by disabled and non-disabled population. We expect the rate to be higher for the latter.
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The labor participation rates for families with and without a disabled member. We expect the labor force participation will be different for both types of families, although it is not clear a priori which ones will have a higher rate. On one hand, if the disabled person is the head of the household, the labor participation will be higher for the rest of the family, since they will need to work more. On the other hand, if the disabled member is not the head of the household, the participation rate of the rest of the family may decrease, since the disabled will need some of the other household members to take care of him.
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Finally, we will estimate the labor economic costs generated because of disabilities. We will concentrate only on two aspects. The first one is the change in the labor force participation of the family when a member is disabled (assuming that taking care of the disabled person may force some members to give up working). The second one is the income loss generated in the economy because the disabled population cannot easily enter the labor force.
In the following section we will analyze how the labor market theory can change when we include disabilities in the conventional theoretical models. This variable will change both the demand and the supply for labor, reducing the individualÃs participation rate. In the third section we will present the results of the estimations discussed before, and in the last section we will include the conclusions and recommendations of this research.
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