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Training Wage or Hidden Injustice?

First, before getting into today’s topic, remember that next Tuesday is Bridge the Economic Gap Day, a day for action. Everything there is to say about this yearly tradition is contained in last year’s post, except that this time, it’s Tuesday, September 5, a week from today.

What is commensurate wage?

Since 2009, the federal hourly minimum wage has been $7.25, and the government has designated which workers it applies to. A whole separate area of law describes who can be paid less, and under what circumstances. There are two major exceptions to the requirement to pay minimum wage, and a person may fall under one or the other, or maybe even both.

It seems that the two can be mixed-and-matched, depending on the needs of the company that applies to be certified for the privilege of paying less. This is known as a commensurate wage, which has more dignity than “sub-minimum,” a word that could be termed meaningless, since “minimum” already means “least.”

One affected group are workers under 20 years old, who can be subject to a 90-day training period at $4.25 per hour. This is based on the idea that it will take them a while to get up to speed. During the probationary period, they will not only learn how to do the particular job, but will adapt to the mores of the workplace, such as timely arrival. When the probationary period ends, they will graduate to the ranks of regular employees. But more about this next week.

The federal rules

At the moment, the subject is disability. The Fair Labor Standards Act is enforced by the Wage-Hour Division (WHD) of the U.S. Department of Labor. For detail-oriented readers who want to follow up, the Field Operations Handbook is available online.

This excerpt is from section 64c00:

A subminimum wage is a wage paid a worker with a disability that is commensurate with that worker’s individual productivity as compared to the wage and productivity of experienced workers who do not have disabilities performing essentially the same type, quality, and quantity of work in the vicinity where the worker with a disability is employed.

Some examples of disabilities that may affect a worker’s earning or productive capacity include blindness, intellectual or developmental disability, mental retardation, cerebral palsy, alcoholism, drug addiction, and age.

Age alone is not considered a disability, but it is often concurrent with other disabling conditions. Disabilities range from mild to severe, in one or more of the following areas: “impairments in perception, conceptualization, language, memory, and control of attention, impulse, or motor function.”

The main thing to know is, an employer can pay a sub-minimum wage only when the disability impairs the person for the specific job. In other words, there would be no justification to pay a blind coffee-taster less.

For the employer, several rules apply. There are standards about work measurement and time studies and how the hourly commensurate rate should be calculated, and the company has to promise to reevaluate the job performance every six months or when the actual requirements of the job change.

The WHD civil servants are specially admonished about the importance of their oversight duties “because many of the workers with disabilities paid at sub-minimum wages have little knowledge of their rights under the various acts enforced by the WHD or may be unable to exercise them.”

Potential for mischief

Apparently, the three-months training period exception can be applied to disabled workers as well as those under 20. Some critics feel that, as a Washington state news editorial phrased it, 680 hours might be excessive:

That seems like a long time for a person to get the knack of a minimum-wage job, which by its very nature requires a relatively low level of skill. Would it really take a person 85 days (of eight-hour shifts) to learn a minimum-wage job?

In Seattle, these matters were hotly discussed when state and city minimum wages were adjusted. Washington’s Department of Labor & Industries had designated four sub-minimum wage categories, called “student learners,” “handicapped workers,” “adult learners,” and “student workers.”

Journalist Anna Minard wrote in her 2014 article:

The state has issued only five certificates in the last five years — four for individual handicapped adults, and one for student workers at a boarding school. But while the state program has been small, there’s no telling how many employers would apply for certificates with Seattle’s new higher wages — and how creatively they might try to interpret the existing but rarely used state codes. Opponents of training wages fear this could become a huge loophole for businesses to exploit.

One problem with the training period is that it encourages the unscrupulous employer to engage in an outright scam. Rather than retaining people at full pay, they might let them go when the probationary period is over, and hire a new batch of “trainees” at a discount. Michelle Chen wrote:

Advocates are also campaigning to stop federal subsidies for segregated sheltered workshops and “training” programs, where workers tend to languish indefinitely in jobs with virtually no redeeming educational value.

Please sign this petition!

House the Homeless hopes the reader, now armed with some background information, will take another step. The National Federation of the Blind is petitioning on behalf of all American workers with disabilities to end the Special Wage Certificates that allow the lower pay scale. The petition itself is a model of persuasive eloquence, and the points are worthy of consideration.

Reactions?

Source: “Field Operations Handbook,” DOL.gov, 09/21/16
Source: “Address flaws in bill creating ‘training wage’,” BellinghamHerald.com, 02/04/13
Source: “What’s the Deal with ‘Training Wages’?,” TheStranger.com, 05/28/14
Source: “People With Disabilities Aren’t Entitled to the Minimum Wage,” TheNation.com, 09/07/16
Image courtesy House the Homeless

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Disability Wage or Exploitative Loophole?

Eighty percent of disabled people are said to be excluded from the American workforce. Even for those who are deemed employable, the picture is not bright.

According to the Americans with Disabilities Act, private-sector employers with more than 15 employees are not allowed to discriminate against disabled people in the area of pay. They are also supposed to make “reasonable accommodation” (e.g. wheelchair accessibility) for these workers without reducing their pay to recoup the cost of this accommodation (e.g. wheelchair ramp).

But section 14(c) of the Fair Labor Standards Act (FLSA) allows these same employers to pay less based on productivity, which on the surface seems fair. Why should a company write the same paycheck to someone who makes one widget per hour, as to the expert who makes five widgets per hour? Good point. But however sensible this may be in principle, the day-to-day realities are many and tangled.

The employers’ side

Because so many kinds of human limitations are included under the umbrella term “disabled,” complications arise. Stephen Hawking would be a different type of employee from a someone whose cognitive ability was devastated from the start by fetal alcohol syndrome, or from a military veteran whose PTSD makes the most basic human interactions problematic. Whether fair or not, the scientific genius, regardless of the elaborate support system he would need, will be a greater asset to the company, and there’s no getting around it.

The employees’ side

This means, writes Taylor Leighton, that “some disabled workers can make significantly less than the minimum wage, in some cases even less than a dollar per hour.” Prospect.org says “hundreds of thousands” of disabled workers earn around $2 per hour — with “many receiving a lot less.”

In the documentary film, Bottom Dollars, made in the state of Washington, a member of the organization Rooted in Rights looks at records from other states and remarks, “There’s one person down here who is making two cents an hour.”

To gain skinny-paycheck permission, an employer has to obtain a special certificate from the Labor Department’s Wage and Hour Division. The exception is said to affect between 400,000 and 420,000 disabled Americans, although the exact number is hard to get a bead on.

In 2014, one source said:

Overall, according to the most recent statistics from the Labor Department’s Wage and Hour Division, there are nearly 2,000 certified employers paying more than 216,000 workers a sub-minimum wage.

At any rate, Michelle Chen writes, in recent years the rules have been relaxed here and there, resulting in even less opportunity for disabled workers. She says that employers “can effectively pay whatever they want — if the firms certify the wages are ‘commensurate’ for their duties (an arbitrary standard prone to exploitation).”

Private sector employers can circumvent section 14(c) by characterizing their jobs as training programs, and consequently get way with paying some people less than $1 per hour. Taylor Leighton reports:

Disabled Americans enter these programs under the assumption that they will gain valuable skills that will lead to real-world jobs and financial independence… Many never graduate from the program and are stuck making subminimum wages while employers benefit from the cheap labor.

Another writer notes that some workers make “only pennies an hour for mundane, repetitive tasks.” When analysts get their hands on the numbers, they conclude that less than 5% of the disabled workers in segregated, subminimum wage shops will ever transition into an integrated work environment. In some cases, of course, it may be that the individual is simply not capable of taking on more complex job responsibilities.

But part of the reason for this stagnation can be explained in another way. Apparently, once an employee has learned a task, their “training” status can be perpetuated by changing the task, so the person is once again in training.

NEXT: What is being done, and what needs to be done.

Reactions?

Source: “Can employers actually pay disabled Americans below the minimum wage?,” PolitiFact.com, 08/12/16
Source: “Below the Minimum No More,” Prospect.org, 05/30/17
Source: “Law allowing lower wages for disabled draws scrutiny,” king5.com, 06/01/17
Source: “Some disabled workers making pennies per hour,” ChicagoTribune.com, 02/10/14
Source: “People With Disabilities Aren’t Entitled to the Minimum Wage,” TheNation.com, 09/07/16
Source: “Transitioning to Integrated and Meaningful Employment Act, (TIME Act) (HR 1377),” NFB.org, undated
Photo credit: The Library of Congress via Visualhunt/No known copyright restrictions

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What’s Up with Goodwill?

The National Employment Law Project calculated that two out of three low-wage workers are employed by large corporations. Only one-third work for small businesses, which throws shade on the argument that raising the minimum wage will destroy the economy by slaughtering small businesses. No, two-thirds of the stingily-paid are in the employ of huge, profitable enterprises.

And some underpaid Americans work for Goodwill Industries, much to its shame. Investigative journalist John Hrabe has called the nonprofit exploitative, a racket, and the worst charity in America. Investigating for Watchdog.org, he learned that most Goodwill branches were paying disabled people less than the federally determined minimum wage.

Hrabe’s reportage contains sentences that are scarcely believable, such as this one:

More than 100 Goodwill entities employ workers through the Special Wage Certificate program, a Depression-era loophole in federal labor law that allows organizations to pay subminimum wages to people with disabilities. According to Goodwill, 7,300 of its 105,000 employees are subject to the minimum wage exemption…

Well, it’s a charity, right? It takes in used items of all kinds, and sells them cheaply to the economically disadvantaged. Maybe there simply isn’t enough money to go around. Except, there is. Goodwill was paying out more than $50 million per year to its top earners, with some individuals making $1 million a year. Hrabe gives many shocking examples of executive compensation that has really gotten out of hand.

And the travel expenses? Nearly $40 million, for a year’s worth of travel for the upper echelon. What possible need is there for people who run a charity to travel so much? Goodwill isn’t a thirsty young startup, trawling for business. It’s a long-established, staid, and supposedly trustworthy nonprofit organization. And nowadays, we have the Internet and video-conferencing, and all that good stuff. So the question is worth asking — what’s up with the urgent need to go somewhere?

Busted

Goodwill was accustomed to skating along, enjoying an excellent reputation that received bushels of good press — and didn’t expect its labor practices to be questioned. Some reporters latched on in the early 2000s, and found that the workers were making as little as 20 cents per hour, but their complaints did not gain much traction. In 2012, it was 22 cents an hour.

When you hear someone disparage the minimum wage because it supposedly prevents less-abled people from ever getting jobs, don’t listen. That is a downright fib, as they very well know or ought to. In government, for every regulation, there is a waiver. In this case, a thing called the Special Minimum Wage Certificate allows companies to pay some people far less than the legal minimum.

So, even if the minimum wage went up to $50 an hour, the government would still be willing to cut a deal for businesses that find and exploit the Special Minimum Wage Certificate loophole. And even though Goodwill is nominally a nonprofit, and doesn’t pay taxes, it is one of those privileged businesses.

Hrabe learned some details from Brad Turner-Little, Director of Mission Strategy at Goodwill International, Inc. The special work certificates are only good for two years, and a massive amount of paperwork is supposed to prove that the organization complies with all the applicable regulations. Consequently, the journalist asks:

Why is Goodwill spending so much time and money on this bureaucratic nightmare? Remember, Goodwill claims that the sub-minimum wage policy helps them save money and hire more workers.

It would be nice to reassure readers that this is just a history lesson, and that all discrepancies have been remedied, but sadly this is not the case. In 2016, after four months of investigative work, Henry J. Cordes wrote a highly revealing series for the Omaha World-Herald.

Among other problems, the local Goodwill execs were quite disproportionately overpaid, in comparison with other Goodwills and other nonprofits. Here is a rather incendiary quotation:

While Goodwill Omaha runs job training and assistance programs that serve thousands annually, nearly all of those activities have been funded by government grants and contracts — not the $4 million in annual profits generated by Goodwill’s thrift stores in eastern Nebraska and western Iowa. Even its signature program that employs disabled job trainees within its stores is primarily funded by school districts.

Whoa! Did he just say Goodwill takes money from school districts? In what universe are schools so lavishly bankrolled that they can financially support an charitable organization whose bigwigs collect gigantic paychecks? This alone should be enough to inspire some real public backlash.

Reactions?

Source: “Goodwill Minimum Wage Loophole Will Shock You,” HuffingtonPost.com, 05/15/13
Source: “Goodwill’s Charity Racket: CEOs Earn Top-Dollar, Workers Paid Less Than Minimum Wage,” HuffingtonPost.com, 09/25/12
Source: “Goodwill Omaha: No Culture of Thrift,” DataOmaha.com, 10/22/16
Photo credit: Mike Mozart (JeepersMedia) via Visualhunt/CC BY

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Nonsense Around a Corporate Decision

Apparently, the minimum wage issue is vulnerable to all kinds of potential spin, depending on particular number-crunching techniques, how various terms are defined, and so forth. As in so many fields of human endeavor, unreliable data can doom to failure any attempt at meaningful analysis.

Putting that aside, there are things the voting public forgets, for better or worse. For instance, these few sentences from Garry Reed say a lot:

It’s not so much that the minimum wage is back in the news again as it’s always in the news. No matter how high it’s raised there will always be someone demanding that it be raised more. They miss the point that the minimum wage is not, was not, and never should be meant to be a “living wage” and no one should ever think that it ought to be.

Keeping that in mind, it is not surprising that in no state of the Union can a full-time minimum wage worker afford to rent a one-bedroom apartment. It is difficult to reconcile a full-time worker’s inability to afford shelter with the fact that corporate executives pull down as much as $10,000 PER HOUR.

Here is a repetition of the assertion that we just don’t understand what the minimum wage is meant to be, phrased this time by Sara Lin:

The minimum wage was never intended to be a “living wage” on which one could support oneself, let alone a family… The minimum wage was meant to be an “entry level” wage, that is a minimum wage allows an employer to hire and pay a lower wage to someone who has no job skills, let alone any experience in holding down a job.

That last bit is important. Anyone who has owned or managed a small business has stories to tell about absolutely clueless new hires. Through ignorance or carelessness or just plain inability to function in a socially acceptable way, a single employee can cause enormous damage. But they still have to be paid!

In some businesses, elderly retirees are welcomed because at least they’ve got the basics down. A person accustomed to the world of work is familiar with the concept of showing up on time, wearing shoes rather than bedroom slippers. It is possible to empathize with employers who resent compensating incompetence.

Of course, salary isn’t the only factor. There are unemployment and work comp insurances to be paid. And the phenomenon known as “wage compression,” which is what happens when starting salaries are too close to whatever the existing workers are getting. Not surprisingly, the old hands feel unappreciated and indignant, and ask for raises.

Big businesses

It is appropriate to worry about effects on small businesses, but statistically, most minimum wage workers are employed by companies with over 100 employees — in some cases, thousands and thousands of employees, who are slighted by such tricks as keeping their hours under the “full-time” limit, to avoid paying benefits. As a result, America is full of people working at two or three different minimum-wage jobs that add up to well over “full-time hours,” who are still not entitled to any benefits.

One of the behemoth corporations is Walmart, famous for the fact that its employees are so poorly compensated, many are on food stamps and other forms of government assistance financed, of course, by the taxpayers. At the top of our page is an internet meme discussed by a writer named Steve Straub in a piece titled “Another Ridiculous Liberal Minimum Wage Meme DESTROYED by Facts.”

Here is how the writer purports to annihilate the concept that Walmart could easily afford to pay its workers more:

Earlier this year, Walmart raised the starting wage for more than 100,000 of its employees. This move reportedly cost at least $1 billion to implement, though the long-term costs could potentially be far worse.

Supposedly, because of this gesture, Walmart had to not only fire 1,000 employees from its home office, but close five of its stores across the nation, affecting another 2,500 employees. As Straub predicted, it did get worse, because only weeks later Walmart announced it would close 154 stores, affecting 10,000 workers.

All, supposedly, because the extraordinarily generous (yes, that is sarcasm) company raised some workers to $9 an hour. Straub winds up with:

When either government or businesses raise the minimum wage, it skyrockets costs.
To compensate, businesses then lay off workers. So yes, some workers wind up with a more livable wage, but at the cost of a bunch of other workers winding up with NO WAGE at all!

Economists could argue about the validity of this conclusion all day. The point here is: How does any of this realistically discredit the disputed meme?

Let’s review the text:

The Walmart family is worth $144 billion. Tell me again why they can’t afford to pay their workers $15 an hour?

The question still stands. As the old saying goes, the Walmarts already have more money than God. With the family taking such a huge cut of the profits, ordinary people are indeed still asking why the Walmarts can’t afford to pay their workers better, or even a lot better.

Straub’s article didn’t even put a dent in that question. There is nothing ridiculous about wondering why the executives and shareholders of Walmart are justified in taking such a large share. The only ridiculous part is that they are able to get away with it.

Reactions?

Source: “There’s More to Minimum Wage Jobs Than Wages,” SoapBoxie.com, 03/23/17
Source: “Minimum Wage Should Not Be Living Wage,” CivilBeat.org, 05/17/13
Source: “Another Ridiculous Liberal Minimum Wage Meme DESTROYED by Facts,” TheFederalistPapers.org, 11/26/17
Image by Other 98.com

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Things People Say About Minimum Wage

When all else fails, minimum wage opponents become fervently patriotic, because freedom is at stake. Shouldn’t a person have the right to work for any amount they are willing to accept? There is one little problem with that. If everyone believed it, we would never have had labor unions, and America would have never become the economic powerhouse that gives patriots something to wave the flag about.

A version of the red, white and blue sentiment was phrased by Michael Rathbone, former policy researcher at the Show-Me Institute:

If workers do not feel that they are being fairly compensated, they are free to look for employment elsewhere.

The trouble is, America is full of people fearfully hanging onto awful jobs. Hasn’t this guy ever heard of one-industry towns? If the catfish processing plant is the only local business, you work at the catfish plant, or else as a bartender, and there are only so many bartender jobs.

On the other hand, Garry Reed wrote in an article for Soapboxie.com:

It’s true that some people get stuck in low-paying jobs and can’t get unstuck through no immediate fault of their own… Maybe they dropped out of school, had a kid, had another kid, never learned to manage their money, did drugs, weren’t willing to leave family and friends and familiar surroundings to seek out a better life, so they took the first job they could get and turned it into a rut.

So, in other words, he’s saying it is their own fault. They quit school, didn’t learn how to balance a checkbook, started drinking, didn’t use contraception, or possess quaint old family values that require caring for elderly or disabled relatives. These people, according to Reed, are victims of their own bad choices.

In which case, expecting the government to make things better, by forcing employers to pay a minimum wage — and even increase it every now and then — is grossly unfair. Making businesses subsidize low-paid workers is “wrong” and constitutes an injustice.

The thing is, somebody is going to wind up subsidizing those low-paid workers who need food, medical attention, etc., and it’s going to be the taxpayers. Shouldn’t it be instead the businesses they work for?

But wait — Reed perceives even more injustice perpetrated upon employers who, after all, provide valuable training:

And in some cases the employer of a low-skilled part time worker just may be training someone who becomes a future competitor who out-works, out-performs and out-competes that former employer and runs him or her out of business.

Wait a minute. It seems like, in line with the writer’s own tough-love philosophy, if somebody does the job better than the company where they started out, that too should be accepted as a price of freedom and the marketplace!

This sentence written by James Dorn in a Forbes article is an example of one type of the mind-boggling statement that comes up in these discussions:

But if a worker is producing $5.15 per hour and now the employer must pay $9 per hour, there will be little incentive to retain her…

The verb “produce” is interesting. While it has yet to be proven that any Chief Executive Officer, anywhere on earth, even the head of Walmart, “produces” $9,000 per hour, it never occurs to any of these theorists that, just maybe, executive compensation should be cut.

Dorn writes:

Employers have more flexibility in the long run and will find ways to economize on the higher-priced labor.

By economizing, he’s talking about such strategies as holding back on raises for the more established, higher-paid employees. Well hey, how about economizing on the millions doled out to CEOs, rather than penalizing long-term employees?

Incidentally, arguing some aspect of the minimum wage debate, another Dorn sentence goes like this:

If one gets empirical results that go against the grain of long-held economic laws, one should be very wary of advocating policies based on those results.

What??? He’s not talking about legislation, but law in the sense of the law of gravity, the laws of nature; and it doesn’t even make any sense. If empirical results — otherwise known as reality — go against “long-held economic laws,” then maybe they weren’t laws in the first place. But this is an example of the kind of mumbo jumbo that surrounds minimum wage discussions.

In his 2013 OurFuture.org article, Richard Eskow looked at another objection:

There’s also their much-beloved fantasy of the minimum wage as “racist.” Seriously. It’s a dirty argument to make — but then, there’s a lot of money at stake.

He refers to a writer named Jonah Goldberg who asserted that the original promoters of the concept were racists who instituted minimum wage because it would harm black workers, saying, “The Wall Street Journal even calls an increased minimum wage ‘The Minority Youth Unemployment Act.'”

There is one very frightening potential consequence of minimum wage legislation that is even worse than the outsourcing of jobs to workers overseas: the probability that increasing numbers of jobs will be filled by robots. Twenty years ago, many people thought the idea that supermarkets could get along without cashiers was ridiculous. Now, grocery chains have installed self-checkout operations that not only eliminate cashier jobs, but turn customers into unpaid workers for the corporation.

Reactions?

Source: “The $22 (An Hour) Question,” ShowMeDaily.org, 03/31/13
Source: “There’s More to Minimum Wage Jobs Than Wages,” Soapboxie.com, 03/23/17
Source: “The Minimum Wage Delusion, And The Death Of Common Sense,” Forbes.com, 05/07/13
Source: “Real Faces of the Minimum Wage,” OurFuture.org, 04/21/13
Image: United Food and Commercial Workers Union