Research finds no negative impact of repealing law allowing companies to pay disabled workers below minimum wage

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Debate continues to swirl nationally on the fate of a practice born of an 86-year-old federal statute allowing companies to pay workers with disabilities subminimum wages: anything below the federal minimum wage of $7.25 an hour, but for some roles as little as 25-cents-per-hour.

Those in favor of repealing this statute highlight assumptions about reduced productivity along with the unfairness of this wage level—often used elsewhere to pay, for example, food service workers who typically make additional wages in tips. Those against repeal have voiced concerns that, without subminimum wage laws, employment opportunities for workers with disabilities may dwindle.

However, one new study has found no significant negative impacts in states that have already ended the practice, according to researchers at the University of Pennsylvania Perelman School of Medicine.

The findings, published in JAMA Health Forum, include important policy considerations for lawmakers to consider as a new Congress takes shape.

Researchers studied two states—Maryland and New Hampshire—that had phased-out the practice, created in 1938 as part of the Fair Labor Standards Act (FLSA) to incentivize businesses to hire disabled soldiers, who were thought to be less productive in the mainstream workforce.

Currently, employers paying subminimum wages to people with disabilities must receive a 14c certificate that is approved by the Department of Labor (DOL). Many do so in what are known as sheltered workshops, often separating these employees—a majority of whom have intellectual and psychiatric disabilities—from their co-workers who do not have disabilities.

In the study, there was increased labor force participation of people with cognitive disabilities in these states after repeal of this law, with varying effects at the individual state level.

"We know that employment and wages are important determinants of health," added Atheendar Venkataramani, MD, Ph.D., associate professor of Health Policy and Medicine and senior author.

"This builds on previous studies that have shown employment and financial stability to be key drivers of health disparities among people with disabilities. Among people with intellectual disabilities, studies have found integrated employment to be associated with better psychological well-being and self-esteem and job satisfaction."

Labor force participation rose in both states following repeal, indicating the "inclusive nature of repeal, as it brings people with cognitive disabilities previously not connected with employment resources into the labor force," added lead author Mihir Kakara, MBBS, MSHP, formerly a Neurology fellow with Penn, and now assistant professor of Neurology at NYU Grossman School of Medicine.

"This points towards the fact that these people are able to work in equal paying, fully integrated jobs as their peers who do not have a disability, given the right resources—something that was perceived not to be the case when this law was first drafted."

The team also underscores the importance of state-by-state solutions should the use of 14c roles be repealed nationally, including the utility of funding for integrated employment into more typical workplace environments. But taken together, the results are an important first glimpse at a future where workplace dignity is valued differently, while still ensuring a net benefit to the economy.

The future of the practice is likely to be made clearer soon: a bipartisan bill to phase out subminimum wage roles and creating more inclusive jobs was introduced in the previous Congress, while the Biden Administration is currently conducting a comprehensive review of the 14c program, with a decision anticipated soon.

More information: Repeal of Subminimum Wages and Social Determinants of Health Among People With Disabilities, JAMA Health Forum (2024). DOI: 10.1001/jamahealthforum.2024.4034

Journal information: JAMA Health Forum

Provided by Perelman School of Medicine at the University of Pennsylvania