Wage Policy Research

New Publication

The Labor Market Effects of Subminimum Wage Elimination: Evidence from a National Analysis

Michelle Yin, Regina Seo & Hoa Vu
Labour Economics, 100, 102884 (2026)
School of Education and Social Policy, Northwestern University

Abstract

This study examines the labor market effects of eliminating Section 14(c) subminimum wage employment laws for people with disabilities in the United States. We construct a novel panel dataset combining the universe of Department of Labor Section 14(c) administrative records (2015–2024) with individual-level data from the Current Population Survey (2009–2024). Exploiting the staggered elimination of Section 14(c) across fifteen states, we employ event-study and difference-in-differences designs to identify dynamic treatment effects. We find that elimination policies reduce formal subminimum wage employment by approximately 2,000 workers per state within two years. Importantly, we find no statistically significant reductions in overall employment rates, competitive integrated employment, or hours worked among workers with disabilities. Estimates suggest economically meaningful reductions in welfare income receipt. These findings indicate that subminimum wage abolition achieves its intended policy objective by eliminating formal sheltered employment without imposing the adverse employment effects that critics of minimum wage policies predict. Our results inform ongoing federal deliberations over phasing out the Section 14(c) program.

Key Findings

• Elimination policies reduce formal subminimum wage employment by approximately 2,000 workers per state within two years, with precisely estimated effects and no differential pre-trends.
• No statistically significant reductions in overall employment rates, competitive integrated employment, or hours worked among workers with disabilities following elimination.
• Economically meaningful reductions in welfare income receipt, indicating that elimination increases economic self-sufficiency rather than welfare reliance.
• Difference-in-differences estimates suggest positive effects on annual wage income, consistent with observed reductions in SSI benefit receipt.
• Workers may transition to low-margin competitive arrangements (social enterprises or supported employment) that pay the statutory minimum — representing a lateral financial move rather than a large wage increase.

Keywords: Subminimum wage, Disability employment, Labor market policy
JEL: H55, J14, J22, J71, J79

Read Paper at Labour Economics