Feeling good, doing harm

When the Americans with Disabilities Act, which mandates that employers must take costly measures to accommodate employees with disabilities, was proposed, economists warned that employers would likely wind up not hiring the disabled. It's pretty hard to prove discrimination in a hiring process. If the disabled worker were better for the job if it cost x to accommodate the worker, but the ADA mandated costs of y>>x, then the disabled worker would likely be found not to be the best applicant for the position.

And sure enough, employment of the disabled dropped with the ADA. But the folks who lobbied for and passed it still get to feel good about how they're great people for caring so much about the rights of the disabled to equal treatment in employment conditional on being employed.

Karl du Fresne tears a strip off of the Kiwi equivalent. Back in '07, Labour mandated that disabled workers in sheltered workshops be paid the minimum wage. The marginal revenue product of many of these folks' labour was very low, but working provided a sense of worth and a constructive activity to fill the day. You don't have to be a rocket scientist to work out what happened. The bigger puzzle is why the IHC, who ran a lot of the workshops, supported the law change.

The answer, as I write in my Listener article, is that IHC has been captured by a rights-based ideology that politicised the treatment of the disabled. In the process, it has distanced itself (in fact alienated itself might be more accurate) from many parents with intellectually handicapped children – the very people who have traditionally been its most loyal and supportive members. The depth of feeling against the IHC that I encountered, both from parents and IHC caregivers (though the latter wouldn’t dare be identified for fear of repercussions), was striking. The impression I got was of an organisation out of touch with its grassroots. In fact a secondary thread in my article touches on the dangers that arise when former voluntary charities such as IHC morph into large, politicised bureaucracies that depend on the government for funding (as IHC does, receiving more than $200 million a year from the state).

As one parent pointed out to me, a conflict of interest occurs when the organisation charged with lobbying the government on behalf of the intellectually disabled is also beholden to the government for money. The pressure to fall into line with government policy – in fact, to effectively become a de facto arm of government – is obviously formidable.

His Listener article will ungate 31 July; I may have to pick up a copy.

The 2007 legislation provided for exemptions from the minimum wage under rather strict conditions:

Permits
The Bill provides that a Labour Inspector may issue a “minimum wage exemption permit” to a worker if the Inspector is satisfied that:

• “the worker is significantly and demonstrably impaired by a disability from carrying out the requirements of his or her work; and
• any reasonable accommodations that could have been made to facilitate carrying out the requirements of the work have been considered by the employer and the worker; and
• it is reasonable and appropriate to grant the permit”.

A permit remains in force for the period stated in the permit, and while the permit remains in force, the rate of wages stated in the permit is to be taken to be the minimum rate of wages prescribed under this Bill for that worker.
SOP No 93 proposes drafting amendments to this clause and, in particular proposes that a Labour Inspector be given the power to " ... revoke a permit at any time if the Inspector considers it is no longer reasonable and appropriate for the permit to remain in force" (Clause 13, New Section 8 of the Minimum Wage Act 1983, inserting new subsection(3A)).

Du Fresne reports this exemption process has been pretty costly for providers, but that the biggest source of workshop closures was IHC's decision that workshops weren't the best way forward under the new regime:

One result of the change was that a new layer of bureaucracy was imposed on the disability sector in the form of Labour Department inspectors who must now individually assess each disabled worker every year. Providers of disability services say the increased administrative burden has added greatly to their costs.

But a much more significant consequence was that IHC, which operated 70 percent of the country’s sheltered workshops, decided they were no longer compatible with its vision of a “fully inclusive” society and closed them all down. Chief executive Ralph Jones said IHC’s primary role was to support people with intellectual disabilities, not run business enterprises for them. Instead, IHC would concentrate on supporting its service users into “mainstream” employment.

It wasn’t a question of IHC’s sheltered workshops no longer being economically viable, because other providers of similar services, having obtained the necessary exemptions from the minimum wage, continue to operate.

The insensitivity with which aspects of the change were handled by IHC is extraordinary. In one town, intellectually handicapped people apprehensive about what the new regime might mean were assured that it would help them get jobs that paid much better money. This went down very well, I was told, until they asked what sort of jobs they would be getting. The list included “restaurant worker”, “library worker” and “pool attendant” – occupations that a caregiver described as “spectacularly inappropriate”.

So we have a nasty mix of policy failure and what appears to be ideological capture of an important charitable sector provider of sheltered workshops. It would be tough for a new charitable organisation to start up in the space that IHC used to occupy. The regulatory hurdles are costly; finding new donors would be tough too as most folks who want to donate for that sector would likely already have subscribed to IHC. Had the National government passed Sir Roger's minimum wage amendment, the government could have considered a less burdensome process for exempting workshops from minimum wage legislation. I'd expect that though to be a necessary rather than a sufficient condition for rebuilding the sector.