Many People With Disabilities Are Being Paid Way Below the Minimum Wage, and It’s Perfectly Legal

Sometimes as little as “pennies per hour.”

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Chris Wilson is 33 years old and has Down syndrome. For the last three years, he’s worked at Kandu Industries, a packaging and assembly factory in Janesville, Wisconsin. He usually makes between $2 and $3 an hour, depending on whether he is packing brackets used in playground equipment or packaging food.  

“He works a full day on Mondays, Wednesdays, and Fridays,” says his father, Rick Wilson. “We’ve set this up because it’s what he wants. We don’t want him to get burned out with working every day.”

Kandu Industries can pay Chris and roughly 150 other workers substantially below the federal minimum wage of $7.25 an hour because of a 1938 provision in the Fair Labor Standards Act that permits employers, who apply to the Department of Labor for a waiver, to pay lower wages to people with disabilities. According to the department, about 20 percent of people with disabilities participate in the workforce, and of that group, about 3 percent, or approximately 195,000 workers, are being paid subminimum wages. These workers typically make well below the minimum wage, sometimes as low as “pennies per hour,” according to the Department of Justice.

Many disability advocates consider the law to be a relic of the past and argue that no other class of people faces government-sanctioned wage discrimination based on who they are. Additionally, they argue these jobs segregate people with disabilities from the rest of society.

“It creates the perception that somehow people with disabilities can’t compete, cannot hold down a job, are not worthy of the same protections all other citizens are,” says Clyde Terry, who chairs the National Council on Disability, an independent federal agency that makes recommendations to the federal government on policy issues affecting people with disabilities. “Which is really contrary to what the Americans With Disabilities Act is all about: That we all should be able to be treated equally.”

Pointing to what they describe as an outdated business model, Terry and other disability advocates have been pushing for the complete elimination of the subminimum wage, an effort that has been slowly gaining support over the past several years. During the 2016 campaign, both parties included the elimination of the subminimum wage in their platforms for the first time. In 2014, President Barack Obama included workers with disabilities in his executive order to raise the minimum wage to $10.10 for people working on federal service contracts. This executive order did not include manufacturing contracts, though, which are one way many people with disabilities are employed and earn below the minimum wage. 

“We’re seeing momentum on this issue like never before,” says Ari Ne’eman, who co-founded the Autism Self Advocacy Network and served on the National Council on Disability under the Obama administration. But, he notes, the momentum for change may be slowing with the Trump administration. “We had an administration that was taking steps to limit and restrict subminimum wage to one in which the new secretary of labor has indicated he has no issue with it. That’s a huge step backward.” 

During his confirmation hearing, Labor Secretary Alexander Acosta expressed his support for the subminimum wage. “I think this is a very difficult issue because you don’t want to disrespect individuals in any way,” he said. “You want to provide incentives or systems to ensure that individuals that might not otherwise have a job have access to a job and are trained into a job.”

Most people making subminimum wages, like Chris Wilson, work in factorylike settings known as sheltered workshops, which are supervised workplaces for people with disabilities. Workers package and assemble products, for example, sometimes folding paper, making jewelry, or sorting mail. 

“For thousands of people with the most significant disabilities, it means the difference between reaching their full employment potential and having no job at all,” wrote Jim Gibbons, the president and CEO of Goodwill Industries, in a 2013 Huffington Post op-ed. 

Goodwill Industries is one of the largest employers for people with disabilities and runs a network of 162 local locations throughout the country. These employees often work on contracts that Goodwill obtains through the government’s AbilityOne program, which ensures contracts are set aside for places that employ workers with disabilities.

“You’ve got entities that are doing quite well, that are raking in donations, that get government contracts to make everything from military uniforms to…pens to whatever,” says Chris Danielsen, a spokesperson for the National Federation of the Blind. “They get these contracts, and they’re paying their workers less than the minimum wage.”

Critics like Danielsen argue that as a $5.59 billion organization, Goodwill has the financial resources to pay their workers a fair wage. (The organization’s money comes from retail sales, donations, and grants.) According to its 2015 990 form, CEO Gibbons, who is blind, collected more than $712,000 in salary and additional compensation. Goodwill declined to be interviewed for this story.

Sheltered workshops are often presented as training programs to prepare people with disabilities to enter the workforce, and many people who work there make minimum wage. But a 2001 report from the Government Accountability Office found only about 5 percent of workers who start in these workshops transition to jobs elsewhere. “This isn’t real work—it’s not real wages,” Danielsen says. “It is a form of discrimination that prevents people with disabilities from getting into the workforce and becoming self-reliant and getting off government benefits.” 

Those opposing a change in the law argue it’s not a civil rights issue but about keeping options open for people with disabilities. SourceAmerica, which works as an intermediary with the government for distributing contracts to nonprofits employing people with disabilities, is one of the few groups lobbying against getting rid of the subminimum wage. In an email, a SourceAmerica spokesperson outlined the argument put forward by most supporters: “There are many people with significant disabilities whose employment opportunities would be at risk if existing options were eliminated without viable alternatives. We, as an organization, feel an obligation to make sure their voices are not lost in this discussion.” 

Some states have already abolished the subminimum wage. In Vermont, for example, no one has worked in a sheltered workshop for more than 13 years. “We made the decision many years ago to invest our money where our values were, and not fund the outcomes we didn’t believe in,” one unnamed policymaker in the state explained in a report looking at how best to get rid of the subminimum wage. A partnership created between the state and the University of Vermont back in the 1980s to help workers with disabilities find regular jobs set the stage for Vermont to become the first state to do away with sheltered workshops. That partnership created a strong infrastructure for supporting workers with disabilities in jobs outside of workshops.

In 2000, policymakers decided to stop giving financial support for employing new workers at sheltered workshops, a change that was made outside the legislative process. Two years later, the state decided to phase the workshops out altogether over a three-year period. By 2003, they were all closed. 

“It was a really trying time to help families understand the value of inclusion and the value of community work because they had a place of safety for their adult children and they didn’t want to give it up,” Michelle Paya, who works as employment director at an agency providing services to people with disabilities in the state, told PublicSource, an investigative news site in Pennsylvania. Within three years, the majority of people who had been working in sheltered workshops had new jobs. By 2012, Vermont’s nonshelter employment rate was twice the national average. 

Those who want to eliminate the subminimum wage understand the concerns that many families have and acknowledge that an immediate repeal without proper supports in place would harm the very people they want to help. They point to a 2012 National Council on Disability report as a blueprint for what can be done. After studying the issue and hearing from various stakeholders across the country, the report outlined how the phaseout should take place. But in order to increase the success of workers with disabilities, changes should begin in elementary school.  

The NCD recommended that the Department of Education issue a rule prohibiting school districts from making a subminimum wage job the goal for any student, noting that an individual’s desire to work is “influenced heavily by the expectations that were set for that person beginning in childhood.” Students with disabilities should learn alongside other students, because students in segregated environments “are less likely to believe they can earn money in competitive, integrated settings as adults.” The completion of a high school education is also a crucial component to move these students into integrated settings—across the country the graduation rate for students with disabilities is nearly 20 percentage points lower than the graduation rate for all students, which creates a major barrier to finding employment.

After graduation, the NCD says the focus needs to be on getting people with disabilities into jobs that pay at least minimum wage and in an integrated workplace where most employees do not have a disability. Because government funding has been essential to expand the integrated employment option, NCD advises federal and state governments to prioritize funding integrated employment rather than sheltered workshops.

Ne’eman describes the argument that subminimum wage is necessary to support people with disabilities as “a lie” and points to the drop in the numbers of people making below the minimum wage. Over the last sixteen years, that number has steadily declined from about 420,000 to 195,000.* Ne’eman says shifting funding priorities at the state level through Medicaid reimbursements is largely responsible for the drop. When governments prioritize integrated employment with Medicaid reimbursements and other financial incentives, the result is a significant impact on the likelihood of integrated employment outcomes for people with intellectual and developmental disabilities.” 

During the Obama administration, the Justice Department began to chip away at sheltered workshops by enforcing a 1999 Supreme Court ruling in Olmstead v. L.C. The court determined the state must provide integrated accommodations for people with disabilities when it’s appropriate and reasonable and the person with disabilities does not oppose integrated resources. In recent years, the ruling has been interpreted to apply to employment programs the government helps fund, such as sheltered workshops. The Obama administration reached settlements with two states the Justice Department determined did not give people with disabilities a path to integrated employment, which sent a message to other states to improve their access to integrated employment.

Should the Trump administration retreat from enforcing state requirements for integrated accommodations in the workplace, advocates suggest any progress made to rolling back the subminimum wage could be stalled. “States are going to be less likely to be doing what they should be doing,” Ne’eman says. “It’s the same on voting rights, it’s the same on any number of other issues: If you don’t enforce civil rights, they aren’t realized.”

Most disability advocates agree the elimination of the subminimum wage should come with adequate supports in place; if it doesn’t, many people working in sheltered workshops won’t be able to find other jobs. Despite the broad consensus that rolling back the subminimum wage and expanding integrated employment opportunities are the best options for those with disabilities, Chris Wilson’s father is worried. “Reality is one thing and idealism is another,” he says. “We’re trying to center on the reality of what’s going on here with abilities of people and what’s good for them on an individual basis.”

Correction: A previous version of this article misstated the timeframe over which the drop occurred.