Materialist theories of disability link disability and labor, hypothesizing that under neoliberalism, disability stigma contributes to labor market precarity. These claims have not been evaluated empirically and the mediating role of the state remains underspecified. Ethnographic fieldwork in a job training program for people with psychiatric disabilities reveals two contradictions in the welfare state treatment of disability. First, disability benefits are set at low levels, yet means-testing limits earnings, channeling people with disabilities into low-wage jobs. Second, contradictory imperatives attached to state funding incentivize placement in temporary jobs. These welfare state contradictions produce disabled workers as a precarious labor force.