The Commensurate Wage Fallacy
Submitted by alewis on Mon, 04/15/2013 – 09:36
Monday, April 15, 2013
By Anil Lewis
Under Section 14(c) of the Fair Labor Standards Act, a flawed formula has been used for years to calculate the commensurate “piece rate” wage for workers with disabilities. This formula, based on average wages and survey data, works mathematically, but fails the common sense test. My twelve-year-old stepson asked me the following question from his math homework: If Johnny can run one mile in two minutes, how fast can Johnny run two miles? He knew that the expected answer was four minutes. However, he also had the common sense to know that Johnny would get tired, and it would take Johnny more time to run each consecutive mile. I told him to put four minutes as the answer. He got an “A” on the homework, but he did not understand why he got an “A” for the wrong answer. I validated his common sense and applauded the fact that at twelve years old, he understood the root of the commensurate wage fallacy. The commensurate “subminimum” wage formula used by over three thousand employers to determine how much they should pay their workers with disabilities is based on the same flawed logic as the math problem.
Before we get to the real commensurate wage fallacy, we must discuss how the prevailing wage is determined. A subminimum wage employer must conduct an annual wage survey of private sector jobs in the employer’s geographic area that are similar to the jobs being performed by the workers with disabilities. Then the employer takes the average of at least three of these industry wage rates to determine the hourly prevailing wage for the job. For example, if three private sector employees are being paid $8.25, $8.30, and $8.35 respectively, the average wage rate of $8.30 would be the prevailing wage used in the commensurate wage formula.
The math is correct, but common sense tells you that the subminimum wage employer gets to shop around to determine which industry wage rates to use, so if there is a private sector employee being paid $9.00 for a similar job, there is no requirement for the employer to use this higher wage in the calculation. It is more likely that there are no similar jobs in the community, in which case the employer should use the federal minimum wage of $7.25 (or the higher state minimum wage, if one applies) as the prevailing wage. Some subminimum wage employers illegally use less than this amount; and with little to no oversight, this exploitation goes unaddressed for years.
The most convoluted and manipulative step used to determine the commensurate wage is for the employer to conduct a time study. The employer chooses an experienced nondisabled worker to perform the job for twenty minutes. Ideally, this is done for at least three cycles by the same person or three different people. This provides three productivity rates that are then averaged to determine the average “piece rate.” Therefore, if thirty-eight items are produced in the first cycle, forty items are produced in the second, and forty-two items are produced in the third, the benchmark would be set for the workers with disabilities to produce forty items in twenty minutes, or two items per minute. This means the expectation is for the workers with disabilities to produce 120 items per hour in order to be paid the $8.30 prevailing wage.
Again, the math is sound, but common sense tells you that the employer can conduct many more time studies and choose the results to manipulate the commensurate wage outcome, ignoring those time studies in which less than thirty-eight items are produced. Essentially, the employer can conduct as many time studies as necessary to justify the wage that the employer would like to pay for the job.
Common sense also tells you that it is unfair to set a productivity benchmark for an entire work day using only a twenty-minute time study. Think of it as another version of my stepson’s math problem: if Johnny can produce 120 items in an hour, how many can he produce in two hours? My twelve-year-old stepson knew the answer. He realized that Johnny would get tired, and his productivity would decrease over time.
The commensurate wage professionals state that they take all of this into consideration by providing a 15 percent time allowance for Personal time, Fatigue, and Delay (the PF&D factor). This is calculated to be nine minutes per hour, which many employers round to ten minutes per hour. Therefore, the productivity expectation set for the workers with disabilities under the earlier scenario would be for them to produce one hundred items per hour in order to earn $8.30. This is more commonly stated to be a piece rate, where the workers with disabilities are paid eighty-three cents for each item they produce.
Although the PF&D allowance may bring the productivity expectation in line with the worker’s reasonable ability to produce over time, this cannot be considered an adequate adjustment for personal time, fatigue, and delay inclusively. Most subminimum wage employers do not encourage the PF&D allowance to be used for breaks. Although most employers are required to provide nondisabled employees a ten-minute paid rest period for every four hours worked, the sheltered subminimum wage workshops are excluded from this requirement. In fact, the ability to work without a break is presented by the subminimum wage employer as a benefit to the workers with disabilities, who are encouraged to work as much as possible in order to earn as much as possible. This type of pressure produces stress; the stress results in mistakes; and mistakes result in defective products that the workers do not get paid for producing.
Delay is also out of the control of the worker. The workers cannot produce anything if the employer is delayed in providing them materials to produce the item, and unlike the nondisabled workers that get paid an hourly rate, the workers with disabilities do not get paid when they are not producing products. The legal requirement to pay for down time is at the discretion of the employer, and if an employer does not provide production supplies in a timely manner, the workers with disabilities can be left idle for much more than ten minutes without the supplies to produce anything, thus earning nothing.
The unspoken math is that there are currently over three hundred thousand people with disabilities being paid wages below the federal minimum. Specifically, 50 percent of these workers receive less than half the federal minimum wage, and 25 percent receive less than one dollar per hour, some as low as three cents per hour. The common sense truth is that most of these individuals are already productive enough to earn the federal minimum wage; they are just victims of the flawed wage formula. Others could be productive enough to earn the federal minimum wage if provided the proper training and support, but will never receive either the training or support while segregated in a subminimum wage work environment. Those individuals being paid less than one dollar per hour are truly not ready for work, but the subminimum wage employers assert that these workers are being afforded an opportunity to experience the tangible and intangible benefits of work. The workers with disabilities get the extremely intangible benefit of subminimum wages. The executives get the true tangible benefit from the public and private dollars meant to support the workers with disabilities, but used instead to support the six-figure salaries of the executives. The subminimum wage employers are essentially getting an “A” for the wrong answer.
The fallacy here is that the workers with disabilities are supposedly being paid based on their productivity. If the employers truly believe that the commensurate wage model is adequate and fair for workers with disabilities, why not use the commensurate wage formula to calculate the wages for all of the sheltered workshop employees, including the executives? My twelve-year-old stepson would know the answer to this question as well.
Mr. Anil Lewis, M.P.A.
Director of Advocacy and Policy
“Eliminating Subminimum Wages for People with Disabilities”
NATIONAL FEDERATION OF THE BLIND
200 East Wells Street at Jernigan Place
Baltimore, Maryland 21230
(410) 659-9314 ext. 2374 (Voice)
(410) 685-5653 (FAX)