Working Paper
RISEI Lab Working Paper No. 2026-10 · 2026
Skills, Family, and the Disability Pay Gap
Download Working Paper (PDF) ↓Abstract
Workers with disabilities earn 23 percent less than comparable peers. We decompose this gap using direct pre-market skill measures and a sibling fixed-effects design. Pre-market skills explain one-fifth of the gap; education and occupational sorting raise the explained share to nearly half, leaving a within-occupation residual of 13 percent. Sibling comparisons attenuate the gap, though power constraints prevent precise within-family estimates. Mental disability penalties persist within families. Workers with disabilities are less likely to enter and remain in high-paying occupations. This gap implies an annual earnings shortfall of approximately $82 billion and foregone federal tax revenue of $16 billion.
At a glance
Key numbers
Overview
Workers with disabilities earn about 23 percent less than otherwise-comparable peers. A long-standing question is where that gap comes from: skills that accumulate before work, sorting into different jobs, or unequal pay for equal work. This paper brings direct measurement to the question.
Using the National Longitudinal Survey of Youth 1997, the study decomposes the earnings gap with pre-market cognitive, non-cognitive, and social skill measures collected before labor-market entry, and adds a sibling fixed-effects design to hold family background constant.
Pre-market skills account for about one-fifth of the gap; adding education and occupational sorting raises the explained share to nearly half, leaving a within-occupation residual of 13 percent. Workers with disabilities are 6.6 percentage points less likely to enter high-paying occupations at labor-market entry even conditional on pre-market skills, and mental-disability penalties persist even within families. Scaled to the employed working-age population, the gap implies an annual earnings shortfall of roughly $82 billion and about $16 billion in foregone federal tax revenue.
Findings
What the paper finds
- Pre-market skills matter, but explain only a fifth.Direct cognitive, non-cognitive, and social skill measures account for roughly one-fifth of the 23 percent disability earnings gap.
- Education and occupation carry it to about half.Adding schooling and occupational sorting raises the explained share to nearly 50 percent, leaving a 13 percent gap within occupations.
- Sorting into high-paying jobs is a barrier.Workers with disabilities are 6.6 percentage points less likely to enter high-paying occupations at labor-market entry, even conditional on pre-market skills.
- Family background does not erase it.Sibling comparisons attenuate the gap, and mental-disability penalties persist within families, though power limits precise within-family estimates.
- The aggregate stakes are large.The gap implies an annual earnings shortfall of about $82 billion and roughly $16 billion in foregone federal tax revenue.
Cite this paper
Yin, M., Seo, R., & Orellana, A. (2026). Skills, Family, and the Disability Pay Gap. RISEI Lab Working Paper No. 2026-10. Northwestern University.
Funding & disclosure
This study uses the National Longitudinal Survey of Youth 1997 (NLSY97). It was developed as part of the Virginia Disability Innovation Fund impact-evaluation portfolio. Views expressed are those of the authors.