People with disabilities can be paid less than the federal minimum wage—sometimes as little as 25 cents an hour—under Section 14(c), part of a Depression-era law. The Biden administration and a bipartisan Congressional group, including U.S. Sen. Bob Casey, D-PA, are working to end this controversial practice, including through legislation, but effects on workers’ employment and health are unclear.

A new LDI paper shows the potential impact of repealing Section 14(c). Led by former LDI Associate Fellow Mihir Kakara, now at NYU Langone Health, and LDI Senior Fellow Atheendar Venkataramani, the study examined how ending Section 14(c) at the state level affected people with disabilities. The researchers found an overall increase in labor force participation, although with state-level variation. They discussed the implications of these results:

What is controversial about the law and why did you study it?

Kakara: Under Section 14(c) of the Fair Labor Standards Act of 1938, companies can be authorized to employ people with disabilities at subminimum wages. They often create “sheltered workshops,” where people with disabilities do jobs such as preparing or packing boxes for shipping, or sorting recycling. 

Proponents of these programs say they offer reliable employment in a safe environment, and that paying minimum wage would disincentivize employers, leading to unemployment of people with disabilities. Disability rights advocates argue that paying subminimum wages exploits workers and creates inequities. 

Venkataramani: Social and economic opportunity are critical drivers of health. Compared to people without disabilities, people with disabilities have high unemployment, low income, poor health, and more chronic conditions such as hypertension and diabetes. They face a number of challenges in the labor market, including assumptions about their productivity, and lack of inclusive work environments that prevent them from leveraging their unique skills and talents. 

The law is still in place. How did you study the impact of repealing it?

Kakara: State laws can end Section 14(c) like New Hampshire did in 2015 and Maryland did in 2016. In our study, we used U.S. Census Bureau data and methods that estimate causal effects to compare New Hampshire and Maryland with states that still allow subminimum wages for people with disabilities.

Of people affected by Section 14(c), 90% have intellectual and developmental disabilities, so we focused on people aged 18 to 45 in this group to exclude people with age-related cognitive disabilities. We studied participation in the labor force—working, looking for work, or being in job training—and we examined employment, annual and hourly wages, and total hours worked annually.

What was the impact of states ending Section 14(c)?

Venkataramani: Overall, ending Section 14(c) so workers are paid at least minimum wage increased labor force participation by 4.7 percentage points. Employment also increased in New Hampshire and Maryland, although that was not significantly different from Section 14(c) states. 

Employment and labor force participation rose immediately after the policy was implemented, suggesting that the symbolism of the policy–publicly valuing workers with disabilities in the labor market through a major policy change–helped drive some of these impacts. 

Kakara: New Hampshire and Maryland did not have identical results. New Hampshire had a statistically significant increase in labor force participation by 5.2 percentage points and employment by 7 percentage points. Though there were smaller increases in Maryland for these measures, they were not statistically significant, so repealing the law had heterogeneous effects. 

Also, despite improvements in some areas, compared to people without disabilities, a greater proportion of people with cognitive disabilities were not in the labor force or employed. When they had a job, they worked fewer hours and had lower wages.

What can people working to change Section 14(c) learn from your results?

Kakara: Based on our data, there’s no clear indication that repealing the law leads to more unemployment among people with disabilities. That argument made by Section 14(c) proponents is not supported.

Our results also suggest that state-level factors might influence labor force participation and employment. Compared to Maryland, New Hampshire had more funding to train people with disabilities to integrate into the job market, which might be a reason for the better employment outcomes in that state. Maryland also had a large number of Section 14(c) workers compared to New Hampshire, so effects might be delayed as they phase out Section 14(c). Other state-level factors like Medicaid expansion status and long-term care services could also play a role.

What is next for your research on employment, health, and people with disabilities? 

Kakara: Future research depends on more high-quality data. The U.S. Census Bureau doesn’t ask directly about intellectual disabilities, so this population is undercounted in federal surveys. Adding that information could support studying and improving work-related and health-related factors for this group. 

It’s possible that some individuals, especially those with more severe disabilities, may be adversely affected by Section 14(c) repeal, but we can’t study that with the current data. As states and the federal government continue to debate minimum wage policies in this population, we hope our research can help motivate further data collection and analysis.

Venkataramani: Many people with intellectual disabilities live with their families through adulthood. If they’re earning low wages, they can’t accumulate wealth for future costs as their families age. We’ll continue studying this issue by analyzing associations between working in sheltered workshops and health behaviors.

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The study, “Repeal of Subminimum Wages and Social Determinants of Health Among People With Disabilities,” was published on November 15, 2024 in JAMA Health Forum. Authors include Mihir Kakara, Elizabeth F. Bair, and Atheendar S. Venkataramani.

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