Down Syndrome and the Minimum Wage
Examining a little-known loophole
Disclaimer: my oldest child has Down Syndrome. I was unsure how I felt about the subminimum wage and wrote this piece to make up my mind.
The minimum wage. One of the most argued about economic policies. Should it be higher? Lower? Stay the same? Should tippable employees have a different minimum wage? What about those who are incarcerated? The arguments are endless, not least of all because there is disagreement among economists over the net impact of the minimum wage. A higher minimum wage increases income for those employed, but economists worry that setting the minimum wage too high will cause reduced employment. For example, supermarkets around the country have increased their number of self-checkout kiosks. Fast food restaurants allow people to order via a computer set up near the counter. Whether these changes are because of the higher minimum wage, which pushes firms to move towards automation, or just the natural progression of technology, is debated.
For all the handwringing that occurs among both economists and the general public regarding the minimum wage, there is one loophole to the minimum wage that is not widely known. The government has given waivers to over 700 companies and organizations that allow them to pay their employees under the minimum wage. Instead, of the minimum wage, workers are paid what is known as the subminimum wage. No, this isn’t prison labor, it’s something far more surprising: it’s for the disabled. There are hundreds of firms that are allowed to pay disabled employees less than $7.25 an hour. How did the US government allow employers to underpay some of the most vulnerable members of society? The Economist explains the history:
Their conditions are authorised by Section 14(c) of the Fair Labor Standards Act, a law passed in 1938 to provide employment training for disabled veterans and workers injured in factories or farms. Today these workers—most of whom are intellectually disabled—make hotel beds, do corporate laundry, pack pharmaceutical pill boxes and shred files, among other jobs.
At first glance it’s preposterous. Clearly immoral. Some of these disabled workers are paid under a dollar an hour. They work all day for companies that pay a wage you’d expect in Bangladesh, not Baltimore. The explanation, however, sounds reasonable: these are workers who can’t give their companies the value of the minimum wage, which varies by US state but is at least $7.25 an hour.
The Economist article relates the story of Jeffrey Pennington, a man who has both Down Syndrome and Autism, a common double diagnosis. According to his mother, Jeffrey has “the mental capacity of a kindergartner”. He works for Creative Enterprises, a Georgia-based non-profit that has been training and hiring the disabled for nearly 50 years. Jeffrey enjoys his job, which consists of taking zip ties out of a box, organizing them into groups of ten, and then putting them into bags. Over the course of a week he puts in about ten hours of work and is paid all of $3.00.
The problem is workers like Jeffrey aren’t capable of doing $7.25 worth of work an hour. Like many low-functioning individuals, some days he doesn’t do much work at all. Some hours he only successfully fills a few bags with zip ties. His wage is determined by his productivity, which is compared to that of an abled worker. If a standard minimum wage employee can fill 60 bags an hour, and Jeffrey only fills 6, then he is paid 10 percent of the minimum wage.
This is a sticky wicket. The potential for abuse is obvious. Firms, rather than hiring traditional workers, could hire disabled workers and take advantage of them. This is downright evil, but God knows there are people out there who wouldn’t hesitate to make an extra buck at the expense of the vulnerable. It’s easy to imagine workers with mild to moderate intellectual disabilities stocking shelves for pennies while other abled workers remain unemployed and managers rake in the money.
This issue splits those who advocate for the disabled. Groups have successfully lobbied for states to ban the subminimum wage entirely. So far, 16 have done so, and more are considering phaseouts. Politicians often embrace such bans, as it is a niche issue that makes for an easy headline. Pushback has come, somewhat surprisingly, from parents of disabled workers. Many report that their children love their jobs and that by getting rid of the subminimum wage, lawmakers are ensuring the disabled never work again. There’s also the question of what disabled individuals should do if they aren’t allowed to work. Some policymakers have not thought this through. The answer given by the sponsor the Dignity in Pay Act in Illinois, which was signed by Governor J.B. Pritzker and will phase out the subminimum wage in the Land of Lincoln, was not exactly convincing. Representative Theresa Mah said that the disabled should be able to find a standard minimum-wage job. Lacking that, disabled adults could simply go to a “museum, park, or zoo, or do art.”
Okie-dokie. Do art. Thanks for the tip.
A useful thought experiment is to compare the subminimum wage to volunteering. Is it ok for a church or a hospital or museum to have a disabled adult volunteer, spending a few hours every day picking up religious missals or greeting visitors at the door? There are nondisabled adults who do that all the time. If so, then it is arguably ok to pay disabled workers a subminimum wage. The regulation surrounding the Fair Labor Standards Act also seems well-thought-out. Firms can’t just hire disabled workers and start paying them a quarter an hour. They are vetted by the government and their pay rates need justification. Comparing the output of a disabled worker to a nondisabled one is reasonable. If we agree it’s fair to expect nondisabled workers to perform a certain task for $7.25 an hour, but that worker would be fired for only being able to do 10% of that task, then it seems fair to pay a disabled worker 10% of the minimum wage. There will always be the potential for abuse. But given that parents often support the subminimum wage, and disabled adults receive government benefits and are not reliant on their wage income anyway, the policy is sensible.
Work gives people purpose and dignity. As long as there is proper oversight, the disabled should not be banned from working.