Why some U.S. disabled workers are making less than a dollar an hour
On a humid June morning, 31-year-old María Castellanos gets ready to go to work at Pathways to Independence in Kearny, N.J.
From 9 a.m. to 3 p.m., she’ll assemble hundreds of tiny packages that will eventually hold hearing aids manufactured by Danish giant Oticon.
For that work, she’ll make about $4.50 per day, or about 85 cents an hour - a tiny fraction of the state’s $15 hourly minimum wage.
Pathways can pay Castellanos and her co-workers that because they have disabilities.
A federal statute of the Fair Labor Standards Act, or FLSA, has allowed companies such as Pathways to pay workers with disabilities less than minimum wage since 1938.
As of July, at least 788 facilities nationwide were paying subminimum wages to approximately 40,000 workers as part of the 14(c) certificate program, so-named after the specific section of FLSA.
While the number of facilities with certificates, which are granted by the Department of Labor, has almost halved since 2019 - in part because some states have stopped the practice in recent years - the program is still active in many states, especially in the Midwest.
Although some subminimum wage workers have a physical disability, most have intellectual or developmental disabilities. The typical 14(c) worker is between 25 and 54 years old and employed only with other similarly disabled workers, in settings such as Pathways’ school-like building. Most have never had a job in the community that paid at least a minimum wage.
The Washington Post examined a sample of about 230 facilities paying subminimum wages, most of which were nonprofits, but some that were private or state-run operations. At all of them, workers were employed at everything from packaging and assembly work to janitorial, manufacturing and food service jobs.
Like many other subminimum wage workers, Castellanos is paid a “piece rate” based on how many units she can assemble while at work, instead of a set hourly rate. In a 2019 to 2021 survey of 14(c) programs, the Government Accountability Office found that 81 percent of workers making less than $3.50 per hour were paid a piece rate.
In addition to assembling packages for Oticon, workers at Pathways do contract work for Vestis, a business that recently spun off from the $18 billion food and facility services company Aramark. The company’s uniform laundry service needs hangers checked for quality and stacked, work it sends to Pathways.
This contract has been a long-standing one for Pathways - the hallways are often lined with stacks of hangers that employees have sorted.
When a contract comes in for sorting hangers, Pathways staff conduct a “time study” to determine wages for workers with disabilities.
In one time study, three Pathways staff members without disabilities sorted and stacked hangers for 25 minutes each.
In total, they stacked 1,530 hangers or about 20 hangers per minute.
Pathways uses a Labor Department calculation that assumes piece-rate workers are productive for 51 minutes of every hour. Based on that, a worker would handle about 1,040 hangers each hour.
The prevailing wage in the area - which is always at least minimum wage - is divided by 1,040 to get the piece rate.
Workers with disabilities will be paid .0145 cents for each stacked hanger.
If Castellanos stacks about 100 hangers an hour, she will make $1.45 per hour.
For jobs that aren’t piece work, subminimum wages can be assessed using other types of time studies and calculators. In those situations, a time study will establish the “job productivity” of a worker with disabilities by comparing the time it takes them to complete a given task to the time a “standard setter,” or worker without disabilities, takes to do the same task. That productivity ratio is multiplied by the local prevailing wage to get the hourly subminimum wage.
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Exploring the 14(c) facility
In Pottsville, Pa., 37-year-old Stacy Schoffstall assembles, fills and labels bags of black sand for Rubbermaid. The sand will be used for outdoor ashtrays and to weigh down other plastic containers.
She spends the day finishing every task available. “I’m really fast,” Schoffstall said. “It’s easy.”
Across the three 14(c) facilities Avenues of PA operates in eastern Pennsylvania, Schoffstall and 93 other workers, all with intellectual or developmental disabilities, make less than the federal minimum wage of $7.25. For those such as Schoffstall who do piece-rate work, the pay is around $3.15 per hour, while those working in janitorial, retail, food service, and even greenhouse jobs are paid on average $6.81 per hour.
All this contract work generated about $200,000 for Avenues in 2023, only 2.7 percent of its total revenue. The bulk of the nonprofit’s funding comes from government grants and subsidies: In the 2023 fiscal year, Avenues received $4.9 million in federal, state and local money, which included $2.4 million from Medicaid - about $749,000 of that Medicaid money went to vocational programs.
In total, Avenues, which along with the 14(c) program also operates other employment and adult and child day care services, made $7.3 million while spending $6.6 million in 2023.
That’s not unusual. Through multiple federal and state programs, the government spends a lot of money on facilities like Avenues - even as the program’s participation rolls have shrunk. In New Jersey, for example, total state funding of sheltered employment almost doubled from $35 million in 2016 to $69 million in 2022. The state’s vocational rehabilitation agency alone doled out $43.8 million to 26 facilities in the 2023 fiscal year, according to data obtained through a Washington Post public records request.
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The companies that rely on subminimum wage labor
At Pathways and Avenues, contract work comes from small local businesses and large international companies. Rubbermaid, Vestis and Oticon are only a handful of the well-known brands that partner with facilities paying subminimum wages. The Washington Post contacted dozens of brands and their affiliated companies that currently contract with facilities that pay subminimum wages.
Many of these companies that contract with facilities for subminimum wage labor told The Post that they are proud to partner with organizations that support and employ individuals with disabilities.
“At Oticon, we are committed to creating a more inclusive society to give everyone a chance to showcase their potential regardless of their physical abilities,” Oticon President Gary Rosenblum said in a statement. In response to further questions from The Post about the wages Pathways pays its workers, a spokesperson for Oticon said, “We will now investigate this case further and initiate a dialogue with Pathways to Independence to ensure that this partnership lives up to Oticon’s ethical standards.”
The facilities actively court partnerships with these companies, and sometimes tout the many financial incentives of using subminimum-wage labor. Companies that work with disabled employees can qualify for several federal tax incentive programs.
Some of the 14(c) facilities also cite reduced compensation and disabled workers’ willingness to do tedious or menial work that workers without disabilities might not want to do. On its website, the Center for Vocational Rehabilitation in New Jersey, which contracts with Nylabone, advertises its services to prospective business partners: “We can cut your costs but not your quality!”
Staff running Pathways and Avenues say that if they were to raise wages for employees, they would have to offer higher bids for their contract work.
If they were to offer the prevailing wage, companies such as Oticon “may say that’s too high for them, because, financially, they can’t afford it for their businesses,” said Tessa Farrell-McPhoy, the program director at Pathways to Independence. “And then, we don’t get any of the jobs.”
To pay workers a minimum wage, a company would have to subsidize the cost difference between a minimum wage rate and a rate for workers with lower productivities, said Peter Keitsock, executive director of Avenues. “That would be great, but I don’t think that would happen,” he said.
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The scale of lost wages
Subminimum wages can vary widely depending on the state, jobs and facility. The latest wage estimates, from the GAO’s analysis of a subset of 14(c) facilities in 2019 to 2021, suggest that half of workers make less than $3.50 per hour - with about 12 percent making less than $1 per hour. But there’s no complete or current picture of the wages currently being paid under these certificates. The Post has appealed the Department of Labor’s nonresponse of a Freedom of Information Act request for this information.
For workers in facilities such as Pathways, the difference between their weekly wages and what they’d make at a minimum-wage job can add up.
If the typical Pathways worker spends 5.25 hours at the facility each day, making a piece rate that amounts to about $1 per hour for 20 days per month, they would earn $16,000 less than they would have had they been paid New Jersey’s minimum wage during that time. Over 15 years, that amount would grow to almost $245,000 in lost income.
In a month of work at Pathways, Castellanos usually makes between $50 and $100. In her first two years there, she made even less - sometimes only $4 every two weeks. She says she wants a job in the community, perhaps at Target - in part to make more money.
“I tell her that it’s better for her to save it because it’s too little money,” said her mother, María Juana Morales. “She wants to do something else, and I want her to be able to rely on herself.”
But Castellanos still wants to help: “Now that I’m an adult, and I’m grown, I would like to help my mom with the rent,” she said.
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Graphics:
https://washingtonpost.com/documents/2da7ded3-57ee-4c8d-b652-7334ff2ea274.pdf
https://washingtonpost.com/documents/a0efe5c2-2062-45c2-9f6b-8fd92f3c1d01.pdf
https://washingtonpost.com/documents/a9f56627-7197-4947-b1d2-9cef9cb949b8.pdf
https://washingtonpost.com/documents/15af021a-802d-48b5-ab27-feac9f190b4f.pdf
https://washingtonpost.com/documents/2f2daade-5849-42ed-ba4c-e57b2c636827.pdf
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