What Happens When States Shift Away from Sheltered Workshops?

• In Event: Developmental Disability Services and Policy

Abstract

Introduction
Approximately 20% of Medicaid Home and Community-Based Services to people with Intellectual and Developmental Disabilities (I/DD) are spent on day and employment services, which assist adults with I/DD in finding and maintaining employment as well as participating in social and recreational activities. Over the last fifteen years, these services have undergone a substantial transformation as states have phased out sheltered workshops—work centers that employ disabled adults and receive Medicaid funding to provide employment services. Beginning in 2014, federal policy discouraged the placement of adults with I/DD in sheltered workshops, particularly young adults. The shift away from sheltered work was motivated by the segregated nature of the service model, its legal authority to pay sub-minimum wage to disabled workers, and concerns about provider-induced demand. This transition prompted substantial controversy, as proponents of sheltered work have argued that its phaseout would leave people with severe impairment without meaningful daytime support. 
Methods
Utilizing 2009-2019 data from the Social Security Administration’s Disability Analysis File and the National Core Indicators (NCI), a recurring probability survey administered by state I/DD service agencies, this study employs a continuous difference-in-difference (DiD) design to assess the impact of sheltered workshop phaseout on employment outcomes for adults with I/DD. Exposure is defined as the proportion of adults with I/DD under age 35 who are employed in sheltered workshop settings in 2013-14, prior to the passage of the Workforce Innovation and Opportunity Act of 2014 (WIOA). WIOA prohibited the placement of young adults in sub-minimum wage employment unless sufficient efforts to place them in competitive employment were documented. As a supplementary descriptive analysis, state fixed effects regressions are also used to examine what services substituted for sheltered work as states phase-out the practice. 
Results
States with a 1 percentage point (p.p.) higher baseline sheltered workshop utilization rate for young adults with I/DD saw 0.295 p.p. higher competitive employment after passage of WIOA. This result is robust across specifications and, when scaled, indicates a 6.5 p.p. increase in competitive employment for young adults with I/DD in the median state and 20,492 additional competitive employment jobs nationally. Using SSA data, the same design shows the shift away from sheltered work was responsible for approximately 6,000 exits from employment among young adults with I/DD, yielding a ratio of 3.4 competitive employment placements for every one person who exited the labor force. Employment losses were fully offset by expansions in day services. Descriptive analyses suggest these results hold across persons with both more and less severe cognitive impairment.
Policy Implications
The phaseout of sheltered work represents one of the most significant controversies in disability policy of the last two decades. Our results provide the first rigorous estimates showing its impact to have been largely beneficial, with increases in competitive employment and expansions in day services offsetting the net employment losses from the elimination of sheltered work.

Author

• Ari Ne'eman, Harvard University
  Presenting Author