From Sheltered Workshops to Competitive Employment: How the Model Is Changing

For decades, sheltered workshops were the primary employment model for people with significant disabilities. Workers were grouped in segregated facilities, often performing repetitive tasks for sub-minimum wages, with little pathway to mainstream employment. That model is now being challenged and, in many countries, replaced. This article traces the history, examines the alternatives, and presents the evidence for competitive integrated employment.

The Sheltered Workshop Model: A Brief History

Sheltered workshops emerged in the early twentieth century, originally as charitable enterprises offering occupational activity to disabled veterans and civilians. By the mid-century, they had become the default employment option for people with intellectual, developmental, and psychiatric disabilities in the US, UK, Germany, the Netherlands, and Australia.

How They Worked

• Workers were employed in a segregated setting, separate from non-disabled workers.
• Tasks typically included packaging, assembly, sorting, recycling, and simple manufacturing.
• Wages were often piece-rate, calculated based on productivity relative to a non-disabled standard. In the US, Section 14(c) of the Fair Labor Standards Act authorizes employers holding a certificate from the Department of Labor to pay workers with disabilities below the federal minimum wage.
• Workshops were usually operated by nonprofit disability service providers.

The Critique

Over time, disability rights advocates began challenging sheltered workshops on several grounds:

• Segregation. Workshops kept people with disabilities out of mainstream society and reinforced the idea that they could not work alongside non-disabled colleagues.
• Exploitation. Sub-minimum wages meant that workers with disabilities were paid a fraction of what non-disabled workers earned for comparable tasks.
• Low expectations. Workshops rarely offered skill development, career progression, or pathways to competitive employment. Many workers stayed for decades.
• Self-determination. The model left workers with little choice about where, how, or with whom they worked.

The Shift to Competitive Integrated Employment

What Is Competitive Integrated Employment?

Competitive integrated employment (CIE) means working in a typical workplace, alongside non-disabled colleagues, earning at least minimum wage, and having the same opportunities for advancement. The worker may receive supported employment services such as job coaching, but the setting is mainstream.

United States: Employment First

The Employment First movement has reshaped disability employment policy in the US. Employment First is a framework declaring that competitive integrated employment is the preferred outcome for people with disabilities receiving publicly funded services.

Key developments:

• State Employment First policies. Many states have adopted Employment First policies, either through legislation, executive orders, or agency directives.
• The Workforce Innovation and Opportunity Act (WIOA), signed into law on July 22, 2014, strengthened the emphasis on CIE. Through Section 511 of the Rehabilitation Act, it requires workers paid subminimum wages to receive regular career counseling and referral services, and requires specific documentation before youth under 25 can be paid subminimum wages.
• Section 14(c) phase-out. According to the US Government Accountability Office (GAO), 16 states had eliminated subminimum wage employment as of January 2025. A Department of Labor proposal to phase out 14(c) certificates was withdrawn on July 7, 2025, leaving the program in place. Federal legislation to phase out Section 14(c) nationwide, the Transformation to Competitive Integrated Employment Act, was introduced again in Congress in July 2025.
• Olmstead v. L.C. (1999). This landmark Supreme Court decision held that Title II of the ADA prohibits the unjustified segregation of people with disabilities. In 2023 the Department of Justice issued guidance confirming that this "integration mandate" applies to state and local employment and day services, including sheltered workshops.

Results: Outcomes depend on the support available after workshops close. Vermont closed its last sheltered workshop for people with intellectual and developmental disabilities in 2002, becoming the first state with none; by 2019, about 47% of Vermonters receiving developmental disability services were employed, compared with 22% nationally. By contrast, a 2025 GAO review of Colorado and Oregon found that only 39-46% of former subminimum wage workers had found jobs paying at least minimum wage.

United Kingdom: Supported Internships and Supported Employment

The UK has taken a different but parallel path.

Key developments:

• Supported internships. These structured study programmes in England are for 16- to 24-year-olds with special educational needs and disabilities who have an Education, Health and Care (EHC) plan. Interns spend around 70 per cent of their time in the workplace, supported by a job coach, and a supported internship lasts at least 6 months and up to a year. The measure of success is a transition to sustained, paid employment.
• Supported employment model. Supported employment, often described as the "place, train and maintain" model, moves people into paid jobs and then provides in-work support, rather than the "train then place" approach of traditional day services. The same evidence-based approach underpins Individual Placement and Support (IPS) for people experiencing mental health challenges.

Results: Success is measured by how many interns move into sustained paid work, and the approach depends on job coaching and employer engagement being available locally.

Germany: Inklusionsbetriebe

Germany's approach reflects its dual system of sheltered workshops (Werkstatten fur behinderte Menschen) and an emerging inclusive alternative.

Key developments:

• Werkstatten remain widespread in Germany. According to the German government, 283,581 people worked in the work area of the workshops in 2023, and their average monthly pay was 232 euros. Workshop workers who are not employees have an "employee-like" legal relationship with the workshop and receive a basic amount plus a performance-related increment rather than a standard wage.
• Inklusionsbetriebe (Inclusion Enterprises). These are businesses on the regular labour market in which at least 30 percent of employees are people with severe disabilities; the share should generally not exceed 50 percent. Unlike sheltered workshops, Inklusionsbetriebe employ people on the general labour market, and they can receive funding from the compensation levy (Ausgleichsabgabe) for setting up, expanding and equipping the business.
• Budget fur Arbeit (Budget for Work). This programme allows people who are entitled to sheltered workshop placement to instead work for a regular employer, who can receive a wage subsidy of up to 75% of the regularly paid wage.

Results: Inclusive alternatives exist, but the sheltered workshop system remains deeply entrenched and large.

Netherlands: From Sociale Werkvoorziening to the Participatiewet

The Netherlands underwent a dramatic policy shift in 2015.

Key developments:

• Sociale Werkvoorziening (Sheltered Employment Act). Until 2015, the Netherlands operated an extensive system of sheltered employment (sociale werkplaatsen) under the Wet sociale werkvoorziening (Wsw).
• The Participatiewet (Participation Act). Since 1 January 2015, no new people can enter the Wsw. Responsibility for supporting people into work moved to municipalities, with the aim of more people with work limitations working for regular employers, supported by wage subsidies and job coaching.
• Banenafspraak (Jobs Agreement). The cabinet and social partners agreed to create 125,000 extra jobs for people with work limitations by early 2026: 100,000 in the private sector and 25,000 in government.
• Quotumregeling (Quota scheme). A quota regulation applies if employers do not meet the agreed numbers; it has applied to government employers since January 1, 2020. The government has announced plans to simplify the jobs agreement and the quota regulation.

Results: The transition has been uneven. Critics argue that closing sheltered employment to new entrants without enough investment in supported employment has left some people without meaningful options.

Australia: Disability Employment Services and the NDIS

Australia's transition has been influenced by the introduction of the National Disability Insurance Scheme (NDIS) and reforms to Disability Employment Services (DES).

Key developments:

• Australian Disability Enterprises (ADEs). Australia's equivalent of sheltered workshops: about 20,000 people with disability work in around 600 ADEs. ADEs face growing criticism for low pay, limited career development, and segregation.
• NDIS and employment. The NDIS commenced in trial sites in July 2013 and has operated nationwide since 1 July 2020. It funds individualised supports that help participants take part in social and economic life, opening pathways beyond ADEs.
• Employment services reform. Inclusive Employment Australia replaced Disability Employment Services (DES) from 1 November 2025.

Results: In its final report, four of the six commissioners of the Disability Royal Commission recommended transforming ADEs and ending subminimum wages by 2034. The federal government said this recommendation required further consideration.

The Evidence for Competitive Integrated Employment

Advocates and researchers point to several advantages of competitive integrated employment:

• Higher wages. Workers in competitive employment earn significantly more than workers in sheltered settings. Even part-time competitive employment typically exceeds sheltered workshop income.
• Better quality of life. Integrated work offers more social inclusion and contact with colleagues outside disability services.
• Capability. With the right support, people with significant disabilities can succeed in a wide range of competitive jobs. The barrier is not capability but the availability of support and the willingness of employers.

Remaining Challenges

• Pace of transition. Many countries are moving slowly, and workers in existing sheltered settings need carefully managed transitions, not abrupt closures.
• Quality of new jobs. Competitive employment must mean decent work. Part-time, precarious, or minimum-wage jobs without career development are not automatically better than sheltered work.
• Support infrastructure. Effective competitive employment requires investment in job coaching, workplace accommodations, and employer engagement.
• Family and individual concerns. Some families and individuals value the community and safety of sheltered settings. Transition must center self-determination and genuine choice.

Key Takeaways

1. The global trend is clear: from segregated sheltered employment toward competitive integrated employment in mainstream workplaces.
2. Every major jurisdiction is developing pathways, though progress is uneven and the legacy sheltered workshop systems remain large.
3. Competitive integrated employment offers better wages and social inclusion, but only when the right support is in place.
4. Successful transition requires investment in support services, employer engagement, and respect for individual choice.