Worth Less? Exploring the Effects of Subminimum Wages on Poverty among U.S. Hourly Workers

Abstract

The Fair Labor Standards Act’s minimum wage laws provide important protections for workers. However, it still permits employers to pay subminimum wages to youth under age 20, student-vocational learners, full-time students, individuals with disabilities, and tipped workers. This has important economic consequences, especially for economically vulnerable workers in the low-wage sector. Using 2009–2019 Current Population Survey–Merged Outgoing Rotation Group (CPS-MORG) data (n = 502,976), we find that 3.7 percent (about 1,565,805) of hourly workers were paid subminimum wages based on state minimum wage laws, and subminimum wages were associated with increases in family poverty by 1.4 percentage points. Importantly, the relationship between subminimum wages and poverty differed across workers with particularly telling results for disability. Unlike for youth and students for whom access to subminimum wage labor was associated with decreased family poverty, subminimum wage work compounded already high poverty rates for hourly workers with disabilities. Within a broader context of low-wage work, this research speaks to the impacts of subminimum pay on economic insecurity and poverty—an ongoing social problem disproportionately affecting people with disabilities.