Lawmakers in multiple states are trying to abolish the subminimum wage, which allows employers to hire certain people and pay them less than the statutory minimum. The most recent push is from Minnesota politicians. Here’s what you need to know.
Exploring the Subminimum Wage
While we all know about the federal minimum wage, an underlooked facet of American society is employers’ reliance on the subminimum wage – a 1938 law that allows employers to pay certain staff less than the legal minimum.
Department of Labor Criteria
All an employer needs to do is fill out a form and send it off to the government, and as long as they meet the requirements, they’re able to pay their staff pennies.
Who Qualifies for Subminimum Wage?
The Department of Labor (DOL) states that the subminimum wage is 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.”
Controversy and Criticism
Initially intended to provide employment opportunities to disabled people, this 86-year-old law allows employers to pay disabled workers next to nothing for hours of work – with data estimating a disabled worker earns $3.34 an hour on average.
State Initiatives
But some politicians have had enough of the law. The subminimum wage law has been abolished in 16 states, and now Kansas and Minnesota are on the front foot, aiming to get rid of it.
Exploitation Concerns
Lawmakers in Minnesota and Kansas are in the process of moving funds from the government to help employers transition to paying disabled staff the minimum wage.
Funds for Employers Moving Away from Subminimum Wage
New laws have been put in place in both states that provide financial grants to places that employ disabled people to push their wages above the minimum.
Financial Incentives
They’ve further incentivized employers in Kansas by creating a special tax credit available to employers that pay at least the minimum wage.
Minnesota’s Push to Abolish Subminimum Wage
Last year, Minnesota lawmakers voted on a package spending bill to provide funds to these businesses, train employers, and help with individual cases.
Progressive Measures
And just last week, House lawmakers approved a bill that would ban the practice if it were passed.
Minnesota has the third-highest number of people reliant on subminimum wages in the country.
Bipartisan Efforts to Ban the Subminimum Wage
Subminimum pay has been a cause of concern with disability advocates and lawmakers for decades.
Congress has tried and failed multiple times to ban the practice, despite government reports that the Labor and Justice Department has committed “persistent failures in regulation and oversight” of employers.
Social Security Concerns
Bipartisan efforts to repeal the law have been rejected multiple times.
Supporters of the law argue that repealing it could negatively impact social security benefits for disabled workers and cause some companies to go out of business, although disability advocates refute these allegations.
Advocate Perspectives
Disability advocates argue that it unfairly penalizes disabled workers and allows employers to exploit workers.
Workplace Exploitation
Often, employers hire disabled people to work in so-called “sheltered workshops” where they’re segregated and paid a fraction of a non-disabled worker’s wage.
Sheltered Workshops
These workers are hired to do basic tasks like packaging, labeling, or shrink-wrapping goods, and critics argue they aren’t given training or resources to move to other forms of employment.
According to 2021 data, only 5% of disabled workers working in sheltered workshops transition to other employment.
Arguments for Sheltered Workshops
However, supporters of sheltered workshops argue that they give disabled people opportunities they often wouldn’t have in a mainstream workplace.
Minnesota Republican Jim Abeler stated, “Nobody should be trapped, and so if they want to be independent, we should try to support them in that.”
Benefits for Families
They argue that these workshops can give families a sense of stability and give parents a chance to find work, as they know their adult children will be looked after.
Real Pay for Real Jobs
In March 2022, the Department of Education started the Real Pay for Real Jobs program.
This program awards $167 million in grants to state agencies that create jobs for people with disabilities.
Challenges Ahead
While the Biden administration is working on abolishing the subminimum wage, it has a long route ahead.
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The post Minnesota Lawmakers Push to End Low-Pay Loophole for Disabled Workers first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
