President Trump Should Keep The Subminimum Wage

President Trump’s decision to suspend all pending Biden-era federal regulations means his administration can decide which aspects to keep and which to discard. One change that he should scrap altogether is former President Biden’s attempt to eliminate the subminimum wage.

The subminimum wage allows certain employers to pay workers with significant cognitive, developmental, and physical disabilities below the hourly federal minimum wage. Gaining this exemption entails a bureaucratic process for the employer, who must document and assess that a disability impairs the worker’s productivity relative to the output of a typical non-disabled worker. Employers may pay a wage proportionate to the prevailing wage rate for non-disabled workers, based on observed productivity differences.

The jobs these disabled workers do come in numerous forms, but the majority are facilitated by non-profits in sheltered workshops or modified employment settings. They are typically routine tasks, like packing or price-tagging a product, sorting and recycling, basic maintenance or working on an assembly line. Workers often require extensive supervision and, given the range of disabilities, may experience disruptions or cause them.

Critics and many federally-funded disability charities argue that subminimum wage employment is exploitative. That is the motivation behind abolishing the carve out. They seem to have in mind workers with marginal disabilities who might otherwise work in the formal labor market at the federal minimum wage. Yet many families of severely disabled individuals rightly fear that abolishing the subminimum wage would eliminate job opportunities for their loved ones, causing a real loss to their well-being.

In a recent, heartfelt Free Press piece, Jill Escher explains this dynamic: “As an autism advocate, I have spoken to many individuals who earn subminimum wages, and for them, the money is almost never the point.” Instead, she writes, these individuals are “seeking purpose and pride, and a sense of responsibility.” Yet activists pushing to eliminate the subminimum wage would put all these benefits at risk.

Escher argues that the notion these workers could command the federal minimum wage, or that non-profits could afford to pay it, defies common sense. Those affected include people with Down Syndrome, severe forms of autism, cerebral palsy and other motor function difficulties, blindness, and traumatic brain injuries or neurological disorders. These are not minor disabilities that can be accommodated with small workplace adjustments. The suggestion that the individuals can compete for minimum-wage jobs in the broader labor market is naive.

As a libertarian who believes in individuals’ rights to sell and buy labor, I oppose the minimum wage in principle. All good economists, though, should recognize that the larger the gap between a wage floor and an individual’s productivity level, the greater the risk a wage price control will cause unemployment.

Indeed, even academic papers that find little overall effect of modest minimum wages on jobs document that they do harm job prospects for workers with the least experience or lowest skills. “Although disability activists argue that all they want is “equal rights” for the disabled, in reality, they’re sidelining the people they say they’re fighting for,” Escher writes.

The evidence from states that have already eliminated subminimum wages supports this. Sixteen states—including California, Washington, Illinois, and Maryland—have banned subminimums. Maine eliminated subminimum wages in 2020, Escher writes, and two-thirds of former participants are now unemployed. Similarly, over 80 percent of people with severe cognitive impairments remain unemployed in Washington State, which eliminated its subminimum wage in 2021.

Such aggregated evidence won’t convince everyone. Yet more careful empirical analysis also finds damaging effects of increasing minimum wages on disabled individuals. A recent paper by Jeffrey Clemens, Melissa D. Gentry, and Jonathan Meer examined the effects of state-level minimum wage increases during the 2010s. The results confirm what basic economics would predict.

When large minimum wage increases occurred, employment among prime-age individuals with severe disabilities declined by 3.2 percentage points more than among those without disabilities. For all working-age individuals with severe disabilities, employment fell by 2.1 percentage points more than for non-disabled workers, a substantial drop for a group that already faces an employment rate of just 35.5 percent. The labor force participation rate of severely disabled workers also declined, meaning many of them didn’t just lose their jobs—they stopped looking for work altogether.

Like it or not, individuals with severe disabilities will always be on the margins of the labor market. Big minimum wage spikes, like those suggested by the Biden administration with its proposal to abolish subminimum wages, would result in significant job loss and reduced labor force participation for these disabled workers. The effects on the quality of life for the workers and their families could be devastating.

President Trump should reject the Biden-era push to eliminate subminimum wages. If we must have a federal minimum, Section 14(c) of the Fair Labor Standards Act should remain in place.