DULUTH — Josh Haug patiently folded each towel from a massive green bin at Essentia Health’s fitness center in Duluth on Tuesday, stacking them in neat piles.

The 41-year-old, who has an intellectual disability, spends two shifts a week laundering and delivering clean towels to gym-goers — and earning more than minimum wage. It’s a dramatic departure from the nearly two decades when he received “pennies on the dollar” to complete menial tasks at a segregated facility alongside dozens of other people with disabilities, said his mother, Joanne Steinke.

“It would be a great month if he brought home a check of $17. And now he makes $11 an hour,” she said. “There’s just something about having your own money, and being accountable for it, that has given him a lot of pride.”

The state is putting additional grant dollars toward helping employers transition away from the decades-old practice of paying people with disabilities subminimum wage to do repetitive tasks in centers, often called sheltered workshops. However, lawmakers stopped short of eliminating subminimum wages last year, opting not to join more than a dozen other states in ending the practice.

It was a blow for many disability rights advocates, who hoped legislators would follow the recommendations of a state task force and end subminimum wages in 2025. They plan to renew that push as lawmakers resume work in St. Paul next week, with some advocates now suggesting a 2028 sunset date of subminimum pay. Whether state leaders will change their minds about the issue remains to be seen.

“As long as we’re allowing subminimum wage to happen, we are sending a universal message to all of Minnesota that people with disabilities are worth less than [others],” said Jillian Nelson with the Autism Society of Minnesota, who co-chaired the subminimum wage elimination task force.

More than 3,200 workers with disabilities are paid less — often far less — than Minnesota’s minimum wage, which is $10.85 for large employers and $8.85 for smaller employers. The state has the fifth highest number of subminimum wage earners in the nation, according to U.S. Department of Labor data.

Other advocates, many of whom are parents of adult children with severe disabilities, staunchly oppose an end to subminimum wages. They say the state should retain the option for people to work at the center-based programs segregated from the community.

Carlisle Ford Runge views the issue as a parent and an economist. His daughter, 36-year-old Elizabeth Runge, has Smith-Magenis syndrome, a genetic disability. For more than a decade, she has been a client of Merrick, Inc., and is paid less than minimum wage.

“It gives her a very definite sense of fulfillment. It’s something she enjoys working on with her friends and colleagues,” he said. “This is a major part of her life.”

The long-term consequences of ending subminimum wage will be “profoundly damaging,” said Runge, a professor of applied economics and law at the University of Minnesota. “The labor market is cruel, and it will displace disabled workers.”

Sen. Jim Abeler, R-Anoka, shares his concern. He said lawmakers opted for a compromise last session when faced with proposals to abolish the subminimum wage.

“There is simply not a place for some of these individuals in market rate,” he said. “If [subminimum wage] goes away, those people will be sitting in their homes.”

An end to subminimum wages doesn’t have to change where people work or what they do, countered Maren Hulden, supervising attorney at the Minnesota Disability Law Center. She said the state has created a plan to phase out subminimum wage and put a lot of resources toward addressing concerns.

“Workers in this country should have some basic protections. But workers who have disabilities, many of them have been excluded from those protections for decades,” Hulden said. “It is well past time for us to change that.”

Employers shift away from subminimum pay

The U.S. Commission on Civil Rights recommended in 2020 that Congress repeal the law allowing subminimum wages. It suggested a phase-out period for service providers and people with disabilities to transition to other options, with the priority being competitive-wage jobs integrated in the community.

The federal Department of Labor announced in September that it will review the use of federal certificates that allow employers to pay subminimum wages and look at the impacts if it stopped issuing the certificates.

In Minnesota, 54 employers have been issued a certificate or have one pending. That’s down from about 70 a year ago. The state still has the third highest number of the certificates in the nation.

Providers anticipate subminimum wages could be going away, said Heidi Hamilton, director of disability services at the Minnesota Department of Human Services, “They really want to be ahead of the curve and figure out how to do it without being forced to do it.”

Lawmakers devoted more than $5 million in grants in the current two-year budget to assisting employers with the shift to more inclusive workplaces and helping counties, tribes and other organizations support job opportunities for people with disabilities. The state also set aside cash to train case managers and started to require that providers report on the number of workers they pay a subminimum wage. In 2022, the state gave out $10.5 million in grants to support people with disabilities in mainstream employment.

State grant dollars were key as Phase-Industries in central Minnesota ended its use of subminimum wages last summer. CEO Tim Schmutzer said the nonprofit’s annual surveys showed common themes: Individuals wanted more employment opportunities and better pay and wanted to work in the community.

“That repetitive, widget work — day to day, year after year, at a substandard pay that’s really only legally authorized to those with disabilities or prison inmates — was no longer relevant, helpful or humane, frankly,” he said. “So we said, ‘It’s time. Let’s do this.'”

Instead of their old default, where groups of people with disabilities were driven together to a facility, the nonprofit is moving to individualized employment plans with the goal of securing competitive-wage jobs in the community, he said. However, he noted that they also heard from a client and his guardian who preferred to continue working with the same friends he had been clustered with for decades.

Providers need to balance a multitude of preferences and ensure people aren’t left behind, Schmutzer said.

Andrew Kasl, who lives in a group home in Harris, spent a decade doing subminimum wage work like lawn care with Phase-Industries. He’s now a dishwasher at Grand Casino Hinckley.

“I love it,” Kasl, 39, said of the job that he said pays him about $15 an hour. “It’s much nicer. I get alone time on my own, and it’s fun. I get trusted.”

His earnings allow him to take trips up north, and he is planning a visit to Deadwood, S.D.

“There’s a lot of things I can do and buy that I haven’t been able to do in the past,” he said. “I finally got fair payment.”