Friday, April 11, 2014

Wage Theft by Employers: The Most Prevalent Crime?

The Economic Policy Institute posted a brief note by Ross Eisenbrey with the provocative title Wage Theft is a Bigger Problem Than Other Theft—But Not Enough is Done to Protect Workers.

Eisenbrey provides this explanation of what is meant by wage theft:

"Wage theft is a far bigger problem than bank robberies, convenience store robberies, street and highway robberies, and gas station robberies combined. Employers steal billions of dollars from their employees each year by working them off the clock, by failing to pay the minimum wage, or by cheating them of overtime pay they have a right to receive."

This graphic was provided:

This suggests that wage theft is much bigger than what one might call street crimes—but how much bigger? Eisenbrey references a survey whose results were published under the title Broken Laws, Unprotected Workers. That study surveyed 4,387 low-wage workers in Chicago, Los Angeles, and New York City in 2008. It issued these conclusions:

"Workplace violations are severe and widespread in the low-wage labor market. In our sample, 26% of low-wage workers were paid less than the minimum wage in the week prior to the survey, and 76% of those who worked more than 40 hours were not paid the legally required overtime rate."

"More than two-thirds of our sample experienced at least one pay-related violation in the previous work week. Assuming a full-time, full-year work schedule, we estimate that workers lose an average of $2,634 annually due to workplace violations, out of total earnings of $17,616."

This suggests that low wage workers are being deprived of up to 15% of their wages by workplace violations. Could this really be true? Could businesses see low-wage workers as defenseless nobodies who can be taken advantage of at will? Can we trust the results of this one survey?  Conveniently, there is a second survey that was released a few weeks ago.

The Los Angeles Times published an article by Tiffany Hsu titled Nearly 90% of fast-food workers allege wage theft, survey finds. This survey was performed by Hart Research for an advocacy group calling itself the Low Pay Is Not OK campaign. It included 1,088 workers from ten of our large cities.

"The vast majority of fast-food workers in the U.S. say they’ve been the victims of wage theft, according to a survey…."

"Out of 1,088 respondents nationwide, 89% said they have been forced to do off-the-books work, been denied breaks, been refused overtime pay or been placed in similarly unsavory circumstances."

"The same holds for 84% of McDonald’s workers, 92% of Burger King employees and 82% of Wendy’s rank and file, according to the survey, which was conducted by Hart Research for the Low Pay Is Not OK campaign."

We now have two independent surveys that arrive at the same conclusion. Some might still be dubious about the validity of self-reported offenses by these workers. Let us then return to Eisenbrey’s graphic. His number for the amount of wage theft was not intended to be a precise number. Rather, it is a lower bound. It was taken from a Department of Labor document describing its 2014 budget. It included this statement:

"In FY 2012, WHD [Wage and Hour Division] utilized over 1,000 investigators, completed 34,139 compliance actions, and collected more than $280 million in back wages for more than 308,000 workers."

A thousand investigators executing 34,139 compliance actions and recovering almost a thousand dollars apiece for 308,000 workers—if you thought the prior claims were smoke, well, that provides some fire for you.

Nelson Lichtenstein presents us with a conflagration. Making employees work "off the clock" is a form of wage theft.

"Although both K-Mart and Target proscribe overtime pay and squeeze their managers and workers to keep labor costs in line, neither has been the subject of a class-action ‘off-the-clock’ suit. Wal-Mart, on the other hand, was defending itself against seventy-five such suits as of December 2008 when the company announced a settlement, perhaps costing as much as $640 million, in sixty-three of those wage and hour lawsuits covering hundreds of thousands of workers in some forty-two states."

The indications are that wage theft is common in low-wage industries, and the $280 million is just a drop in a very large bucket.


Nelson Lichtenstein is the author of The Retail Revolution: How Wal-Mart Created a Brave New World of Business.

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