Published May 10, 2017 by the Economic Policy Institute
By David Cooper and Teresa Kroeger
What this report finds: This report assesses the prevalence and magnitude of one form of wage theft—minimum wage violations (workers being paid at an effective hourly rate below the binding minimum wage)—in the 10 most populous U.S. states. We find that, in these states, 2.4 million workers lose $8 billion annually (an average of $3,300 per year for year-round workers) to minimum wage violations—nearly a quarter of their earned wages. This form of wage theft affects 17 percent of low-wage workers, with workers in all demographic categories being cheated out of pay.
Why it matters: Minimum wage violations, by definition, affect the lowest-wage workers—those who can least afford to lose earnings. This form of wage theft causes many families to fall below the poverty line, and it increases workers’ reliance on public assistance, costing taxpayers money. Lost wages can hurt state and local economies, and it hurts other workers in affected industries by putting downward pressure on wages.
What can be done about it: Strengthen states’ legal protections against wage theft, increase penalties for violators, bolster enforcement capacities, and protect workers from retaliation when violations are reported.
For the past four decades, the majority of American workers have been shortchanged by economic policymaking that has suppressed the growth of hourly wages and prevented greater improvements in living standards. Achieving a secure, middle-class lifestyle has become increasingly difficult as hourly pay for most workers has either stagnated or declined. For millions of the country’s lowest-paid workers, financial security is even more fleeting because of unscrupulous employers stealing a portion of their paychecks.
Wage theft, the practice of employers failing to pay workers the full wages to which they are legally entitled, is a widespread and deep-rooted problem that directly harms millions of U.S. workers each year. Employers refusing to pay promised wages, paying less than legally mandated minimums, failing to pay for all hours worked, or not paying overtime premiums deprives working people of billions of dollars annually. It also leaves hundreds of thousands of affected workers and their families in poverty. Wage theft does not just harm the workers and families who directly suffer exploitation; it also weakens the bargaining power of workers more broadly by putting downward pressure on hourly wages in affected industries and occupations. For many low-income families who suffer wage theft, the resulting loss of income forces them to rely more heavily on public assistance programs, unduly straining safety net programs and hamstringing efforts to reduce poverty.
Researchers have long known that measuring wage theft is challenging—it takes many forms, violations are not always recognized or reported, and suitable public data sources are limited. Yet in recent years, several studies have attempted to better quantify the harm caused by wage theft. This study adds to those efforts by using data from the Current Population Survey to assess the prevalence and magnitude of wage theft in the form of minimum wage violations—i.e., workers being paid at an effective hourly rate below the binding minimum wage. We look specifically at instances of such wage theft in the 10 most populous U.S. states: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas. We limit our focus to these 10 states so that we can carefully account for each state’s individual minimum wage policies and state-specific exemptions to wage and hour laws. Data for the 10 most populous states also provide adequate sample sizes to describe the severity of minimum wage violations and the affected populations within each state. Our findings provide a better assessment of minimum wage violations than previous studies that have only considered violations of the federal minimum wage. And, because the total workforce in these 10 states accounts for more than half of the entire U.S. workforce, our estimates shed new light on the scope of wage theft nationwide. Read entire article