Wage theft in America is costing workers as much as $50 billion annually, according to a new Economy Policy Institute (EPI) Report. The authors describe the problem as a “nationwide epidemic”.
The report, titled “An Epidemic of Wage Theft Is Costing Workers Hundreds of Millions of Dollars a Year,” was authored by Ross Eisenbrey, EPI Vice President, and Brady Meixell, EPI intern.
They examined the incidences of wage theft across the country.
Wage Theft refers to illegally not paying workers their rightful wages or benefits. Wage theft may include not paying overtime, making illegal deductions in pay, employee misclassification, not paying the minimum wage, or even not paying at all.
In 2012, more than $933 million was recovered for victims of wage theft who consulted lawyers or complained to federal/state agencies. That is nearly three times more than theft from robberies in the same year.
Most wage theft goes unreported
In the vast majority of cases, however, wage theft goes unreported, hence the real cost is much greater. The authors estimate the toll for workers is approximately $50 billion annually.
“Wage theft affects far more people than more well-known crimes such as bank robberies, convenience store robberies, street and highway robberies, and gas station robberies combined, and can be absolutely devastating for workers living from paycheck to paycheck. For low-wage workers, the wages lost from wage theft can total nearly 10 percent of their annual earnings.”
The authors also gathered data on workers employed in low-wage industries in Los Angeles, Chicago and New York, and found that two-thirds of employees experienced at least one pay-related violation in any given week.
In just these three cities, front-line workers in low-paying industries are losing close to $3 billion from wage theft, the study found.
If those findings are extrapolated to the rest of the country, thirty million workers in low-wage industries are losing out on approximately $50 billion each year.
Over the course of a year, Eisenbrey and Meixell estimate that the average worker loses about $2,634 out of a total in earnings of $17,616 annually due to wage theft in the United States.
Wage theft barely addressed in America
Mr. Eisenbrey said:
“Wage theft is another unnecessary obstacle preventing America’s families from getting ahead, yet we are barely addressing it. Offices tasked with combating wage theft are severely under resourced and understaffed, and several states closed down or cut back their labor departments, leaving workers even more vulnerable to exploitation.”
Congress should immediately grant President Obama’s request for the Department of Labor’s Wage and Hour Division to add another 300 investigators to its staff. The office of the Solicitor of Labor, which prosecutes on behalf of the division, also needs more experts, the authors say.
Congress should not be allowed to award federal contracts to companies that have been convicted of wage and hour violations. There are pending amendments to appropriation bills that would address this.
Current penalties for willful and repeat violations of the law are tiny. Fines should be significantly increased.