Current Affairs

The Subminimum Wage Has Got to Go

Paying workers $7.25 an hour is cruel. Paying them even less is inhumane.

Bob Peterson wants to save up some money, but he can’t. Peterson is disabled and makes a subminimum wage bagging gutter nails for a large company. He works in a sheltered workshop in Aurora, Illinois. “Before COVID, I was going to sheltered work five days a week, putting things into boxes and sorting things,” Peterson explains. “The money I earn there is basically per piece. Sometimes it’s not even worth one trip [to and from the workshop]. I only earn enough to buy a candy bar. For me, it’s not even enough to pay my internet bill, let alone, if I had one, to pay a car loan. In sheltered work, everything is… paid by how many pieces of work you can do.” 

In January, as part of his “American Rescue” COVID relief plan, President Joe Biden called on Congress to raise the minimum wage to $15 per hour. In the same section, the White House called for an end to the tipped minimum wage and “sub-minimum wage for people with disabilities so that workers across the country can live a middle class life and provide opportunity for their families.” Now, it appears all but certain that the elimination of the subminimum wage is off the table as part of COVID relief and no longer on the list of Biden priorities articulated in his Democratic primary platform

As of October 2020, the Department of Labor (DOL) reported that over 1,200 employers nationwide take advantage of the 14(c) Subminimum Wage Certificate Program, which allows them to pay disabled employees a wage below the current $7.25 per hour federal minimum. Workers are paid on account of how “productive” they are, oftentimes per piece produced, as Bob Peterson explained. Employment settings that exist due to this program are called “sheltered workshops.” These workshops claim to offer essential jobs and skills training that ostensibly prepare their workers for future “outside” employment in the community at jobs that pay at least the prevailing minimum wage. A recent estimate found that over 100,000 workers across the country work for businesses that can legally pay them subminimum wages under 14(c). 

Under the law, there is no wage floor in sheltered workshops—no dollar or cent amount is too little. So workers can, and often do, earn under $1 a day. Bob Peterson says, “Sometimes it’s pennies, sometimes it’s more. If I was really lucky, it was $24. Most of the time, not even up to a dollar. I could be working my butt off and not even get a dollar.” The conditions in these workshops have led some to ask, “Does the ADA [Americans with Disabilities Act] work?” 

Anne Thurston, who now has an “outside” job making $11 per hour, worked in sheltered workshops for over 30 years, starting when she was 19 years old. Thurston believes “wage” doesn’t accurately describe what a sheltered workshop employee is earning. She recalled the feeling of getting a check and seeing the dollar amount. “I called it ‘allowance money,’” she says. “When I was working at a sheltered workshop, you never knew what your paycheck would say. … But when it comes to us, you say, that’s terrible. You feel so bad.”

Another worker who asked to remain anonymous works in a sheltered workshop in Pontiac, Illinois. He’s worked there for two years but has previously had “outside” jobs in the fast food and retail industries. In his sheltered workshop, this worker speaks to how low the pay can be. “Some of [my co-workers] make less than a dollar check. That’s their whole life. They can buy a pop or something, but that’s their life.” In the workshop, a worker’s speed and ability can contribute to their pay. “Some people get less than a dollar every week,” he explains. “Some people get $2 a week. …You can get up to $9. Some are able to rack up maybe $100, depending on who you are.” But this worker makes clear that earning power in a sheltered workshop isn’t simply about working hard or one’s ability to master the craft, although that can contribute. The employers have total control over the rate. “It’s their decision to make. They make the final decision.” 

The 14(c) program is a relic of the past. Created by federal law as part of the Fair Labor Standards Act in 1938, the Subminimum Wage Certificate Program was pitched as an innovative policy solution to incentivize employers to hire disabled workers at a discounted price. The bill’s authors were mainly concerned with rehabilitating disabled veterans who could acquire critical job training and vocational development to facilitate their re-entry into the labor force. Today, workers in sheltered workshops disproportionately have intellectual or developmental disabilities, and most of them are not veterans. Research has shown that the vast majority (nearly 95 percent) of people who work in sheltered workshops never actually go on to other “outside” employment. For most workers, it’s not a stop on their employment journey, but rather the first and final destination. 

In September 2020, the U.S. Commission on Civil Rights (USCCR) published a comprehensive review of the 14(c) program and concluded that the program often violated the rights of disabled workers and should be eliminated. Citing a discrepancy between the program’s original aims and current realities, the Commission wrote that 14(c) employers have limited “people with disabilities… from realizing their full potential while allowing providers and associated businesses to profit from their labor.” They added that “[t]his limitation is contrary to 14(c)’s purpose.” Unfortunately, the program is still in operation and new employers can still apply. 

The Commission’s report, coupled with renewed federal interest, has inspired a slew of editorials and public letters in national and local outlets defending sheltered workshops and the use of the subminimum wage, cautioning against workshop closures. In a local Missouri publication called the Gasconade County Republican, a sister of a man who works in one such workshop implored readers to understand that her brother’s employment there is not just a job, but an environment where he can “be active and socialize with many people – people who understand him and truly care about his well-being.” The author discloses in the last paragraph that she herself is a manager at a different sheltered workshop. 

The anonymous worker interviewed for this piece doesn’t feel as optimistic about sheltered workshops’ paternalism. “Some workshops don’t let you do things you have the right to do like listen to music, walk around, and stretch,” he said. “It’s like control. The way it’s structured, you have to do the things they want you to do, not what you want. What they want.” 

Written defenses of sheltered workshops often focus the debate on the supposed tragedy that would ensue should workshops be deprived of their  “right” to offer a subminimum wage, without which defenders claim such workshops could not operate. But can companies that contract with workshops at such low costs not afford to pay at least $7.25 per hour?  The website of the workshop that employs the public letter author’s brother, Empac Group Inc., features marketed reviews from current clients, including PLZ Aeroscience Corporation, a company that has an estimated yearly revenue of $650 million. Another review on the workshop’s site is from Aeorofil Technology Inc., a company with an estimated yearly revenue of $84 million. 

Many workshop owners have proven themselves to be bad actors. Already taking advantage of an exploitative program, many employers have flouted the modest regulations governing sheltered work.  In fiscal year 2019, the DOL’s Wage and Hour Division concluded 227 investigations of sheltered workshop employers. A stunning 86 percent of these investigations found labor violations. Across all cases, the DOL found that 9,005 sheltered workshop employees were owed back pay due to widespread wage theft by 14(c) employers.  The DOL has indicated that one of the most common types of 14(c) violations by workshop employers is failure to count all hours worked. A sheltered workshop investigated in 2018 was found to have been paying its 250 employees in gift cards rather than wages. More recently, a sheltered workshop in Florida illegally failed to provide its employees with career counseling, career services, and referrals which could have provided its employees with opportunities for “outside” employment. Instead, the workshop opted to hold these essential services from their employees, thus ensuring that they stayed in the workshop making subminimum wages.

In a November 2019 briefing of the USCCR, the Chairman of the National Council of Disability remarked: “You can’t have it both ways—14(c) is either work or it is training. If it is work, then it is clearly discriminatory. And if it is training, it is the most abysmal failure in job training history with many of the people with disabilities subjected to this ‘training’ for 20, 30, even 40 and more years, shuttered away in gulags of indifference, many times without any meaningful connection to the community or hope for their futures.” 

In the midst of increased scrutiny, there has been a national push to phase out sheltered workshops in favor of “integrated” and “competitive” employment— i.e., jobs fully integrated within the community that pay the prevailing minimum wage or more. At least 40 states have passed “Employment First” legislation, which aims to phase out sheltered workshops over time and replace them with competitive jobs in the community, coupled with job coaching and skills-based training. At least five states have eliminated the subminimum wage altogether. The “Raise the Wage Act of 2021” would raise the federal minimum wage to $15 by 2025. Currently in the hands of the House Education and Labor Committee after gaining 197 co-sponsors, the bill would also discontinue new 14(c) certificates and would require current 14(c) employers to set a minimum wage of $5 per hour in 2021 with incremental increases each year until $15 in 2025.  Some have pointed out that proposals like these are not nearly as aggressive as they need to be to move beyond sheltered work, as they would extend the ability of 14(c) employers to pay poverty wages to their disabled workers for the next five years. 

Although state “Employment First” policies are a big step in the right direction, aspects of federal law beyond 14(c) need to change to maximize the impact of these efforts. For example, there are asset limits placed on many public assistance programs that disabled people need to survive. Social Security Disability Insurance (SSDI) has a “benefit cliff,” which means that unless a worker carefully monitors their income to ensure it doesn’t go a penny over the limit, they face a reduction to their benefits. The DOL reported that SSDI recipients can lose “100% of their SSDI benefit at the point they earn as little as $1,131 per month for nine months.” This inevitably leads many disabled people to not go to work, turn down promotions, and cut down their hours to avoid getting too close to that cliff. For others, it forces them to stay in the workshop and tolerate the abysmal pay in exchange for not having to worry about being deprived of crucial benefits. This is only one of the ways federal law keeps disabled workers hidden and in poverty. 

In short, the U.S. government is telling vulnerable workers they can only get help if they’re at absolute rock bottom—if they manage to improve their financial position even a little, they’re on their own. Anne Thurston moved out of sheltered work settings after nearly 30 years in workshops. She now needs to carefully monitor her work schedule to ensure that she doesn’t go over the asset limit and face a reduction in her SSDI benefits. “Right now, I’m on a standstill. Making $11 something an hour. … What happens if Social Security says you’re making $12 an hour, you don’t need us. But yes, we do!” Bob Peterson also worries about this cutoff. “I can’t earn more than $2k,” he said, referring to an asset limit placed on his social security benefits. If Bob has more than $2,000 at any time:

[They] cut me down to the point where the agency can’t support me because they are not getting enough from me. If I earned enough outside, they cut off everything where I can’t get services no more… That limit is very heavy and not having the ability to have more than $2k [at any given time] is very limiting to people with disabilities in general to work. 

While Joe Biden’s presidential campaign called for an end to the subminimum wage and the elimination of the “benefit cliff” for SSDI, his “American Rescue Plan” makes no mention of this cliff. Nor do proposed federal bills, like the “Raise the Wage Act,” which aim to shut down sheltered workshops. The absence of such a provision is a failure to address one of the federal programs that keeps disabled people trapped in sheltered workshops to begin with. In addition to this reform, crucial supports such as job coaches and financial incentives to companies to hire disabled workers are necessary. Needless to say, Biden’s American Rescue plan and the Raise the Wage Act do not cover these measures. An end to sheltered workshops and the elimination of the subminimum wage is long overdue. As Anne Thurston said, “I’d like to see equal pay… equal pay next to others in the company. Equal pay.” The goal is a society in which disabled and non-disabled people alike have the right to work should they want to, the right to get paid living wages for that work, and the right to full participation in their communities. People’s value should never be tied to their ability to work, and the role that economic structures have played in disability oppression must be acknowledged. Currently, too many disabled Americans are trapped in sheltered workshops with too few other “outside” options. As Bob Peterson put it, “We are here, but society doesn’t see us.” Ending the subminimum wage is a crucial and necessary step towards justice, but it cannot be the end goal.

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