The Federal Reserve Board published a FEDS Note assessing how disability affects household financial well-being beyond the direct earnings penalty, using Survey of Household Economics and Decisionmaking (2019–2023) data and a subjective measure of whether respondents report “doing at least okay financially.” The analysis finds that controlling for income does not eliminate the well-being gap, implying substantial “hidden costs” of disability that account for more than 40 percent of the overall difference between households with and without work-limiting disability. For prime-age (25–54) single-earner, two-adult households (around 2,420 observations), households with a disability were 21 percentage points less likely to report doing at least okay financially with no controls, 17 percentage points less likely after demographic controls, and 9 percentage points less likely after adding income controls, with the remaining gap falling to 7 percentage points when also controlling for an unexpected major medical expense. The remaining penalty is described as roughly equivalent to a USD 25,000 drop in annual household income. For one-adult households (almost 11,000 observations), the disability penalty was larger across specifications, with a remaining gap of around 16 percentage points after demographic, income, and medical controls. The note also finds female sole earners in heterosexual couples are more likely to have a partner with a work-limiting disability (31 percent versus 22 percent for male sole earners), while the raw gender gap in financial well-being (about 9 percentage points) appears to be driven by income differences. Models using overall life satisfaction show a larger remaining disability-associated penalty than for financial well-being even after controls.
Federal Reserve Board 2025-01-10
Federal Reserve Board research finds hidden disability costs explain over 40 percent of the financial well-being gap
The Federal Reserve Board's FEDS Note highlights that disability affects household financial well-being beyond direct earnings penalties, with "hidden costs" comprising over 40% of the well-being gap between households with and without work-limiting disabilities. Data from the Survey of Household Economics and Decisionmaking (2019–2023) indicates that households with disabilities face significant financial penalties, even after accounting for income and other factors. Female sole earners in heterosexual couples are more likely to have partners with work-limiting disabilities, and the gender gap in financial well-being is mainly due to income differences.