Work Limitations and Income Inequality in the US 1988-2016

This paper studies income inequality by work limitation status in the United States from 1988 to 2016. Despite a growing literature on income inequality, households or individuals with disabilities in the United States have not been considered as part of investigations of changes in inequality. In a context of rising income inequality within the general population as well as policies to improve rights and inclusion with respect to disability, it is unclear how income inequality might have evolved within and between households with and without work limitations. We use data from the March supplement of the Current Population Survey (CPS) using the work limitation disability measure of the CPS. We compute measures of income inequality and the progressivity of government transfers and disability income. Results indicate that income inequality has risen at similar rates overall for households with and without work limitations, thus producing income inequality between the two groups relative to total inequality that is not significantly changing over time. Within groups, for government transfers, we find that a measure of progressivity is significantly declining among households without any work limitation and not changing among households with work limitations. Disability income is found to have significantly increased in progressivity among households with work limitations only. Overall, disability income may have mitigated rising income inequality for households with work limitations. More broadly, due to static between inequality, it appears that policies aimed to enhance the economic and social participation of persons with disabilities in the last three decades might not have been able to reduce income inequality across work limitation status, and warrant further research.