Using UK LFS data, we examine the impact of disability on labour market outcomes by gender since the Disability Discrimination Act. Substantial differences in employment incidence and earnings continue to exist, especially for those with mental health problems. Distinguishing between work-limiting and non-work-limiting disability, the unobserved productivity effect of disability can be separated from discrimination. Limited evidence of wage discrimination against the disabled exists, but the 'penalty' for work-limiting disability, while falling for men, has increased for women. The improvement for disabled males is largely 'unexplained', possibly reflecting the impact of the legislation; this is not the case for females.

PurposeThis paper aims to identify and draw together key themes in the literature relating to the impact of disability on labour market outcomes. In doing so it provides an overview of issues in estimation in empirical work relating to disability.Design/methodology/approachThis paper reviews the existing international evidence relating to the impact of disability on labour market outcomes.FindingsRegardless of country, data source or time period disability serves to reduce labour market prospects. Understanding the reasons for this requires consideration of issues such as separating discrimination from unobserved differences in productivity and preferences, the influence of heterogeneity within the disabled group and the dynamic effects of disability.Practical implicationsThe paper also reviews recent evidence concerning the labour market impact of significant changes in legislation affecting the disabled, particularly the introduction of the Americans with Disabilities Act in the USA. This evidence is particularly useful to policymakers.Originality/valueThe paper provides a comprehensive review of the empirical evidence relating to the labour market impact of disability and the influence of recent changes in legislation.

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