Here’s How $3 Billion Is Stolen From American Workers Each Year

Source: Thinkstock

Source: Thinkstock

Echoing the results of previous studies, the Economic Policy Institute recently noted wage theft has reached “epidemic” levels in the United States, with millions of American workers losing wages to the practice each year.

Wage theft, an umbrella term that is defined as “the illegal withholding of wages or denial of benefits that are rightfully owed an employee,” covers a number of different violations. According to WageTheft.org, “common forms of wage theft are non-payment of overtime, not giving workers their last paycheck after a worker leaves a job, not paying for all the hours worked, not paying minimum wage, and even not paying a worker at all.”

The practice is most rampant in the construction, restaurant, garment manufacturing, and home healthcare industries, though violations are widespread. Further, certain professions, such as childcare workers and cashiers, are subject to particularly high rates of both overtime and minimum wage violations. Maria Echaveste, a professor at the University of California Berkeley School of Law, says that victims of wage theft are typically “low-wage, low-skilled workers desperate to hang on to their jobs. Frequently they are immigrants — the most vulnerable and least apt to speak up.”

Wage theft is particularly disheartening because of who it targets: those who both desperately need their wages, and therefore, those who are least likely to protest the injustices against them for fear of losing their job, as menial as the wages may be. “If you steal from your employer, you’re going to be hauled out of the workplace in handcuffs,” said Kim Bobo, a Chicago workers rights advocate. “But if your employer steals from you, you’ll be lucky to get your money back,” she added, per Salon.

According to the Economic Policy Institute’s (EPI), “survey evidence suggests that wage theft is widespread and costs workers billions of dollars a year.” A study reviewed by the EPI found that of low-wage workers in three cities (New York, Chicago, and Los Angeles), two-thirds experienced at least one pay-related violation in any given week. Researchers concluded that the average loss per worker in these cities over the course of a year was $2,634.

In total, the annual wage theft from low-wage workers in these three cities approaches $3 billion. Further, the amount of money recovered for victims of wage theft from employers totaled more than $933 million, a figure three times greater than all the money stolen in robberies in 2013.

An earlier study conducted in 2008 found that minimum wage, overtime, “off-the-clock,” and meal break violations are among the most widespread wage theft practices. The study found that 60 percent of workers were underpaid by a $1 or more per hour, and of those who worked 40 or more hours per week (about a quarter of those studied), 76 percent were not paid the legally required overtime rate by their employers.

Further, of the nearly 25 percent of workers studied who stayed late or came in early to work before or after their allotted shift, 70 percent did not receive any pay for these hours. Additionally, an astounding two-thirds of those who worked long enough to necessitate a meal break (86 percent) received no break at all.

The study also found that certain demographics are more likely to experience wage theft than others. For instance, “women were significantly more likely than men to experience minimum wage violations, and foreign-born workers were nearly twice as likely as their U.S.-born counterparts to have a minimum wage violation.”

Part of the reason wage theft continues to be a huge problem in the U.S. is due to the fact that there are simply not enough resources for enforcing current regulations (Salon notes that there are about 1,000 investigators overseeing roughly 7.3 million business establishments), nor are there sufficient legislative protections for workers to ensure that employers cannot get away with the practice so easily.

But the lack of resources and legislative action isn’t necessarily for a lack of trying. There have been multiple attempts at introducing legislative protections for workers, which would have helped to stymie the wage theft epidemic. Unfortunately, however, these legislative protections have only succeeded at the state level. According to GovTrack.us, a government transparency website — a bill which would have helped implement protections for workers against wage theft by employers — withered after being introduced to Congress in 2010. The bill was referred to a congressional committee and was denied approval for debate in the House and Senate.

The other issue confronting workers’ rights advocates is that businesses and business advocates have their side of the story as well. From their perspective, wage theft is too big an umbrella term, and doesn’t take into account that some businesses simply don’t know any better. Matthew Haller, a spokesperson for the International Franchise Association who spoke with Salon, notes that franchise owners often fall into this category, since they are generally new to business and don’t understand the regulations.

“You should not put the same label on all of these things … There are gray areas as well as black and white areas,” added Richard J. Reibstein, a New York attorney for Piper Hamilton LLP, in an interview with Salon.

But while it may be true that some businesses don’t have any intention of robbing employees of their wages, some businesses have gone to elaborate lengths to avoid paying workers. Salon points to an instance in which a garment manufacturer fabricated payroll records to avoid paying workers in full. “Employers are working very hard not to pay wages, and to put employees in difficult situations where it’s a ‘take it or leave it’ type of situation,” said Gary K. Pechie, who serves as director of the Connecticut Department of Labor’s Wage and Workplace Standards Division.

Interestingly, while wage theft is most widespread among smaller name, low-wage industries, big name companies as diverse as the San Francisco Giants, McDonald’s, Dunkin’ Donuts, Domino’s Pizza, Staples, Levi Strauss, and Walmart have all been cited with violations. Further, it isn’t always low-wage industries that commit wage theft. Bloom Energy, a fuel cell producer in the Silicon Valley, at one point paid workers it had brought in from Mexico on visitor visas just $2.66 an hour, and eventually paid back wages to the tune of $70,000.

It seems no industry is innocent of the practice, and with the President’s request for 300 more wage and hour division investigators to the Department of Labor going seemingly unnoticed, it looks as wage theft is one epidemic that might be here to stay.

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