The numbers are alarming. Approximately 6.4% of America’s labor force is plagued with some form of physical or mental disability (U.S. Census). Only 1 out of 3 disabled persons is employed, and when they are employed they get on average only about 2/3rds the income of non-disabled workers.
It may be tempting to blame this income discrepancy on prejudice or the selfishness of employers. And this attitude lies behind the push for legal minimum wage rates, which their promoters believe will improve the welfare of the low wage workers. This belief concerning minimum wage rates is at odds with economic forces that pervade society.
In a competitive market, wages earned by labor tend to equal the value contributed to production by labor. In traditional microeconomic analysis, we refer to this as the marginal revenue product of labor. If the minimum wage is above the value contributed by a worker, employers are discouraged from employing that worker. Surprisingly, the federal minimum wage for disabled workers reflects this —it allows the payment of sub-minimum wages to workers whose disabilities inhibit their productivity.
A worker’s wage reflects the value derived from a time unit of labor. If, on average, a worker creates $30 worth of value for his employer in an hour of work, his wage will tend to be higher than if his labor contributes $20 of value per hour of work. The laborer who is paid only $20 per hour when he creates $30 of value in an hour can advertise his service to other employers. The famed economist John Bates Clark reflects on this in his book The Distribution of Wealth,
There is a general rate of wages; and employers in this group can have laborers for what it costs to get them out of the other groups, in which their productive power is smaller. By doing this, they can make a profit. For an interval they can hold the difference between the pay of labor in the general market and its earning power in the industry into which they bring it. This is, however, a vanishing difference; for, as competition does its work, it slips through the employers’ fingers.
If the employer who employs the worker whose labor, on average, creates $30 of value per hour wants to keep his service, the wage paid to him must rise closer to $30 per hour. When labor utilizes capital (like power tools or factory machines), the productivity of that labor is increased. Part of this value is itself received by the capital in the form of a rent, but so too is part derived from labor that uses it. Labor that is more productive receives a higher wage. Accountants that use accounting software will be more productive than those who use typewriters or pen and paper. Farmers that use tractors and combines are more productive than subsistence farmers who lack these means. The cost-reducing technology embodied in capital makes its users and the consumers served by it wealthier.
Alleviating disabilities is profitable.
The same logic holds for disabled workers. A labor-inhibiting disability increase the costs of the worker to produce the same amount of product as a person who is otherwise the same but lacks the disability.
Where there are costs that can be reduced, there is a profit opportunity. Any entrepreneur who succeeds in reducing costs faced by a laborer who suffers from a disability can earn a profit while also improving the lives of the disabled.
Consider a disability that can now be largely disregarded in terms of its economic effects: vision impairment. According to data aggregated by the Center for Disease Control and Prevention, “14 million Americans aged 12 years and older have self-reported visual impairment defined as distance visual acuity of 20/50 or worse.” 11 million of these are able to correct their vision to 20/40 or better with glasses and other visual aids.
In a world without this technology, the ability of these persons to function would be greatly inhibited. Both the quality of their lives and the value of their labor would deteriorate. Today, success in overcoming vision ailments is so widespread that it is easy to ignore the poverty that would exist absent this technology.
But what about those who suffer from extreme blindness? A report from the Wall Street Journal has shown that even many who suffer from blindness can now see with the help of eSight. The product is a visor that uses video technology that, according to the company, allows 3 out of 4 persons who suffer from blindness to see. An eSight visor sells for around $10,000.
Or consider the development of exoskeletons. An exoskeleton from SuitX allows those who are paralyzed to walk. Another company, Ekso Bionics, even promotes exoskeletons as labor-augmenting devices. These exoskeletons can be purchased at a price starting around $40,000. Entrepreneurs are working to lower these costs, however the process is a slow one. They must bear the costs of the FDA approval process, because the exoskeleton is considered a medical device.
Entrepreneurs act as first responders for helping a significant proportion of disabled persons. They stand to gain by offering these technologies on the market. The person who purchases it makes an investment. Not only do she directly enhance her own quality of life, she can augment her labor and, therefore, income.