36 cents an hour? The debate on subminimum wage is here

In front of the woman sits a piece of cardboard with a dozen individual rectangles drawn on in permanent marker. Working slowly but steadily, the woman places a small packet onto each rectangle. When each rectangle is filled, she gathers the dozen individual packets into one larger box that will be sold by a retail store in the Southern Nevada.

A few tables down, a group of men place individually wrapped chocolates into plastic trays and clear boxes destined for a Strip resort. Across from them, amid the steady hum of sewing machines, a woman repurposes retired hotel towels into small rags to be used by kitchen or custodial staff. She pauses only when asked about her brush with rock-and-roll royalty: Decades ago she helped make scarves worn by Elvis Presley. (She used to kiss each one she made because she knew Elvis would also kiss them before throwing them to his doting fans during performances.)

This is just a sliver of the activity happening on any given morning at one of the “employee resource centers” operated by Opportunity Village for people with intellectual disabilities. And these are the people whose lives and livelihoods are affected by a federal policy that has created division among disability advocates.

Section 14(c) of the Fair Labor Standards Act allows certain employers to pay employees with disabilities less than federal minimum wage. Rather than being paid minimum wage — currently $7.25 per hour — these workers are paid based off their production compared to a worker without a disability.

A simplified example: If the baseline is 10 boxes packaged per hour, then a disabled person who takes one hour to package one box will be paid 1/10th of the hourly salary. That’s equivalent to 73 cents per hour. If they only did half a box, that’s down 36 cents an hour.

Is that unconscionable or completely reasonable given the circumstances? The answer has divided disability advocates nationally over the past half decade. It’s a debate coming to the city and state level here as disability advocates opposed to subminimum wage begin to take up the charge in Nevada.

Sometime in December, the Reno City Council is expected to consider a resolution to prohibit subminimum wage from being part of any city-involved contracts and encouraging local businesses and other municipalities to do the same. Meanwhile, Assemblyman Richard Carrillo, D-Las Vegas, is working on subminimum wage policies to be considered in the upcoming legislative session. Provisions being floated for that proposed bill include limiting the number of employers permitted to pay subminimum wage, creating a “wage floor” or minimum subminimum wage of $4.25, requiring reports detailing individualized plans for how to get subminimum wage employees to competitive market wages, and phasing it out completely over the next five years.

Erik Jimenez, the disability advocate spearheading both efforts, says it’s about principle: “Are we equal as humans or are we not? That’s the fundamental question.”

Subminimum wage was intended as a job-training tool, a way to provide employment opportunities to people who would otherwise be considered unemployable. The majority of subminimum wage jobs occur in sheltered workshops, like the employee resource center operated by Opportunity Village.

“It’s an outdated model,” says Jimenez.

He isn’t alone in his position. The National Council on Disability in 2012 recommended phasing out subminimum wage and sheltered workshops. Informing their decision was a 2001 government accountability audit that found only 5 percent of sheltered workshop participants ever transition to a standard job. The U.S. Department of Labor, which certifies businesses and nonprofits that wish to pay subminimum wage, now endorses an “Employment First” model that makes integration with non-disabled people and the larger community a priority.

Three states have banned subminimum wage — Alaska, Vermont and Maine. Seattle banned it at the city level and advocates there are pushing to expand that ban to the statewide level. Several senators, including Elizabeth Warren, have been critical of the policy because of its potential for abuse.

Opportunity Village Director of Advocacy, Board and Government Relations Tracy Brown-May believes there’s a lot Nevada needs to fix when it comes to people with disabilities but subminimum wage isn’t one of them. She acknowledges how striking the numbers can look on paper but insists that low hourly wages only tell a fraction of the story.

She adds, “What did that hour look like?”

Brown-May says the people who make subminimum wage don’t have a traditional employee-employer relationship. They might be socializing with friends. They might simply not have the desire or interest in the task in front of them. What they get in return is leeway and guidance and support. They aren’t made to work when they don’t want to.

“It really is job training,” she adds.

Brown-May likens it to giving a child allowance. It could take a kid 30 minutes or three hours to complete a chore depending on their motivation. The point isn’t the money. It’s about teaching work ethic and self discipline over a lifetime.

Brown-May says everyone Opportunity Village employs to work on its government contracts, which include providing cleaning services to the Clark County Government Center and delivering all of the mail at Nellis Air Force Base, already earns at least minimum wage. She says when it first pursued contracts, the nonprofit promised labor unions it would never undercut labor because it does believe in living wages “for anyone in true job employment” — but not everyone is ready for that, or wants it.

Chuck Neuwohner, the director of workforce development at Opportunity Village, says many people within the intellectual disability community don’t want to work full time out of fear they’ll lose eligibility for federal benefits like Medicaid and Social Security. While some programs exist to help ease these concerns, including a special type of account that can exempt income earned, they are either massively unpopular or unknown by those who could benefit from them.

In addition to its subminimum wage program, Opportunity Village provides other avenues for participants to make money. Through its art programs, people create jewelry, art and even furniture that is sold through a gift shop and thrift store. The artist receives 50 percent of the profit from that. (The other half goes to pay for supplies at the art program.) They also offer “minimum wage opportunities” where people can work for a preset time on something where the subminimum wage structure doesn’t make sense. (Creating ugly Christmas sweaters to be sold online is a recent example.)

Participation in such opportunities hasn’t been overwhelming. People are interested but not in large enough quantities that suggest they seem desperate to earn more, says Neuwohner.

Then, there is the financial reality of the organization.

“None of these programs are profitable,” he says. “Opportunity Village would gain money if these programs went away. They’re a huge money loss. Without getting into specific numbers, it’s a very big number we lose.”

Brown-May adds that one common talking point of disability advocates who dislike the sheltered workshop model is that the heads of nonprofits like Opportunity Village make large salaries. But she defends that salary as necessary in order to recruit a candidate who is capable of operating a multi-million dollar business with hundreds of employees and multiple divisions and branches.

Opportunity Village reported more than $29 million of revenue on its 2016 tax forms. CEO Robert Brown makes more than $373,000 annually in wages and benefits.

Neuwohner says the large budget and fundraising of Opportunity Village allows them to have a dedicated compliance department that ensures they are not only following federal regulations related to subminimum wage but also tough internal standards. He says data has shown people are naturally relying less on subminimum wage as more appropriate job opportunities are found that match niche skill sets.

“There is a great deal of scrutiny,” he says. “There is mutual accountability.”

Opportunity Village is a unique in both its scale and structure. Staff say about 70 percent of its budget is self funded through private donations and 30 percent comes from public funding. It affords them a compliance department and the ability to do enriching non-wage programs like art, music and theatre classes.

Exploitation of subminimum wage might be an issue at private companies or in rural areas where oversight and resources are scarce, but Brown-May says the state’s largest players in the space have upstanding reputations and are committed to developing the employment and life potential of people with disabilities.

“There’s a complexity in this issue,” says Brown-May. “You cannot just say (subminimum wage) should not exist. It’s a safety net. How do we protect people from getting left behind?”

Jimenez has toured Opportunity Village and discussed the issue directly with Brown-May. He acknowledges they do great work but says the outdated sheltered-workshop model still needs to be addressed. He sees the proposed subminimum wage ban as the beginning of a reform that addresses other issues affecting the severely intellectually disabled.

“Obviously if we open this can of worms we have to help people,” he adds. “We’re not looking to ban anything completely tomorrow. And maybe there’s a population where it does make sense. What we’re trying to do is not trap anyone. That’s what we’ve seen happen for decades.”

Eight companies or organizations within Nevada are certified to pay subminimum wage. Opportunity Village is the largest, with 480 people receiving subminimum wage. Transition Services, also based in Southern Nevada, is the second largest with 357 people receiving subminimum wage. The other six entities with certifications have a combined total of 265 people making subminimum wages. Those organizations are Alpha Productions Technology in Sparks, Easter Seals Nevada in North Las Vegas, High Sierra Industries in Reno, Ormsby Industries in Carson City, Ruby Mountain Resource Center in Elko and United Cerebral Palsy of Nevada in Reno.

That is a total of 1,102 people across the state who’d could be affected. Nationally, there are more than 150,000 people with disabilities making less than minimum wage.

Jimenez says he has already begun receiving threatening pushback from people for raising the issue, but he believes subminimum wage is something worth fighting against. He believes there is a better way than the standard and wants to see Nevada at the forefront of the movement.

“We are not trying to get rid of anyone,” he says. “We are trying to raise opportunities for people.”