Subminimum Wage: What It Is, Why It’s Unjust, and Why It Needs to End

By Kate Anderson

Many are familiar with the push to increase the United States federal minimum wage above $7.25. However, most are unaware of an 84-year-old law that allows businesses to pay disabled workers just pennies for each hour of work.

Subminimum wage, as this practice is commonly known, is permitted under section 14(c) of the Fair Labor Standards Act (FLSA). The provision was created in 1938 to account for “substandard workers” who were “not up to normal production.” The regulation has remained, and the language around it has barely budged. According to the Department of Labor’s website, subminimum wage provides for “individuals whose earning or productive capacity is impaired by a physical or mental disability, including those related to age or injury, for the work to be performed.”

The FLSA was a milestone in labor rights, establishing a minimum wage and child labor protections that were previously nonexistent, and the origins of section 14(c) are not fully discriminatory. By including the regulation, the government aimed to provide for injured veterans seeking reentry into the workforce. However, the FLSA was clearly exclusionary in certain areas when it was first created. The law failed to protect those working in agriculture or other sectors with a high percentage Black workers. With the advance of civil rights, most of these exemptions have changed, but not for disabled Americans.

Over the decades, subminimum wage has become a mainstay of employers who wish to exploit the severely disabled without offering a pathway toward meaningful work and the minimum wage. This practice usually occurs at retail businesses or in vocational rehabilitation centers and “sheltered workshops”, where disabled workers are paid based on productivity at a small fraction of a non-disabled worker’s rate. These workshops serve as segregated work environments from which as few as 5% of workers transition into employment in the community, according to government audits. In such exploitative conditions, disabled workers are given neither the dignity of receiving a fair wage nor the training or resources to participate in outside jobs. 

Although the Americans with Disabilities Act (ADA) was passed over 32 years ago and brought new protections to many disabled Americans, the monumental legislation still fails to address countless discriminatory practices including subminimum wage. Challenges to the section 14(c) wage exemption began in the 1960s, led by the National Federation of the Blind. However, these and subsequent efforts to repeal the law have not been successful. While subminimum wage remains legal at a federal level, fortunately, Vermont and several other states have abolished the practice and sheltered workshops. 

In recent years, bipartisan leaders have renewed the effort to end subminimum wage. In March 2022, the Department of Education launched the Real Pay for Real Jobs initiative, which offers a total of $167 million worth of grants to state agencies willing to create jobs for people with disabilities. The Rehabilitation Services Administration will oversee this grant project, known as Subminimum Wage to Competitive Integrative Employment (SWTCIE).

Since his campaign, President Biden has expressed a commitment to supporting Americans with disabilities and advancing programs similar to SWTCIE. Last year, Build Back Better included a provision similar to SWTCIE with almost twice the funds, but this law didn’t pass Congress. The Inflation Reduction Act was recently passed and includes legislation that will indirectly support people with disabilities who are disproportionately affected by climate change. However, the bill does not include any changes to subminimum wage.

And so, section 14(c) of the FLSA remains to this day. Critics of change often call on ableist ideas to justify the exemption. They claim that workers in sheltered workshops, usually those with intellectual and developmental disabilities, are unable to perform work in normal settings. This argument essentially relies upon the disgraceful assertion that disabled workers are “substandard” as they were referred to in the FLSA in 1938.  It fails to account for the stories of those who have successfully transitioned to community jobs when granted support. The argument also fails to acknowledge that the state agencies have not provided reasonable accommodations to support such transitions. SWTCIE aims to bridge that gap by funding direct service professionals and other training and resources.

Leaders who oppose a fair wage for disabled people sometimes cite the receipt of federal disability benefits as a reason to allow such low earnings. If workers with disabilities are already receiving monthly federal disability benefits, opponents say: “why should they also be paid at a normal rate?” Of course, anybody who’s had experience with the disability system knows that navigating benefits payments is a complex task. It takes time and resources to receive benefits that barely cover basic living expenses.

With so many barriers to financial independence, people with disabilities risk further financial instability when faced with subminimum wage. According to the National Low Income Housing Coalition’s Out of Reach report, workers making minimum wage at $7.25 an hour working full time, 40-hour weeks cannot afford market-rate housing, with rents for two-bedroom apartments too high to be affordable for these workers in every single state. In most states, people earning minimum wage cannot afford to rent even a one-bedroom apartment. Disabled workers who are more likely to need to work less than 40 hours per week or who are earning lesser amounts under the subminimum wage clause face even more difficult conditions. Living with a disability is expensive, and benefits that do already exist don’t cover all health costs or even other basic necessities. Many disabled workers and their families are worried about receiving a fair wage, because the amount might exceed the “earnings cliff”, which takes away disability benefits above a certain amount of income and adds to instability. Obtaining and sustaining these benefits while gradually returning to work is a baffling labyrinth and speaks to the need for a major overhaul of the benefits structure. The pressure to comply with this confusing and unfair system does not, however, justify the continuation of subminimum wage.

Initiatives like Real Pay for Real Jobs are a step in the right direction, but advocates have their eyes on the outright abolition of subminimum wage at a federal level. It is past time to end this discriminatory policy established by the FLSA almost a century ago. People with disabilities deserve not just fair pay, but also dignity, respect, and the resources to grow, thrive and connect to their larger communities.

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Published on September 28, 2022