Disabilities, Mandatory Worksite Modifications, and Employment: Some Potential Policy Dilemmas

This article considers the impact of mandatory worksite modifications for handi-Abstract capped workers on optimal employment at the competitive firm. The authors argue that worker impairments introduce production uncertainty, and they demonstrate that for firms with decreasing absolute risk aversion, mandatory worksite modifications reduce the optimal employment level. Simulation exercises suggest that the employment reduction could be substantial, particularly in smaller firms. They also show that by using appropriately coordinated tax policies, the undesirable employ ment effect of mandatory worksite modifications can be mitigated. However, if the government relies on these policies to eliminate the effect entirely, firms lose any incentive to minimize modification costs.