America's Hidden Crime Wave: Employers Steal $20 Billion From American Workers Every Year

By Jeff Spross, The Week

17 August 16

n dollar terms, what group of Americans steals the most from their fellow citizens each year?

The answer might surprise you: It's employers, many of whom are committing what's known as wage theft. It's not just about underpaying workers. They're not paying workers what they're legally owed for the labor they put in.

It takes different forms: not paying workers the federal, state, or local minimum wage; not paying them overtime; or just monkeying around with job titles to avoid regulations.

No one knows exactly how big a problem wage theft is, but in 2012 federal and state agencies recovered $933 million for victims of wage theft. By comparison, all the property taken in all the robberies of all types in 2012, solved or unsolved, amounted to a little under $341 million.

Remember, that $933 million is just the wage theft that's been addressed by authorities. The full scale of the problem is likely monumentally larger: Research suggests American workers are getting screwed out of $20 billion to $50 billion annually.

The most dramatic recent example occurred right on Capitol Hill in Washington, D.C. The Senate employs several hundred food service workers in its cafeterias through a private contractor. Last December, those workers successfully organized for a pay raise. But then the workers discovered the private contractor was demoting them into job titles but not changing their duties to get around federal regulations about how much government contractors need to compensate their employees. That kicked off a Labor Department probe, which found the contractors had been short-changing the workers in other ways since 2010. Now 674 employees will be getting over $1 million total in back pay, or about $1,500 per person.

Catherine Rampell pointed out that some of the Senate cafeteria workers were so poorly paid that they were homeless or on public assistance. The Americans who get hit hardest by wage theft tend to be the most vulnerable workers with the least power: low-paid, often in service work, often racial minorities or part of marginalized social groups.

Stories abound throughout the economy. A group of workers in Indiana, Kentucky, Illinois, and Florida who are employed by the traveling carnival company North American Midway Entertainment are suing for wage theft going back to 2013. Working a carnival can regularly involve 12-hour days. But the workers' attorney estimated they'd sometimes been paid as little as $5 an hour, because their employer dodged overtime requirements and other rules. The Chicago Tribune reported that two employees of a Dunkin' Donuts franchise in Chicago sued in May for wage theft. This summer saw a record wage theft settlement when 18 car wash workers from New Jersey and New York were awarded $1.65 million for denied pay and emotional distress.

Unfortunately, precisely because these workers are so often the Americans who lack a voice and social clout, the wage theft that gets reported and dealt with is just a small slice of the problem.

An in-depth study in 2008 surveyed 4,387 workers in Chicago, Los Angeles, and New York. The sample was meant to be representative of the 1.64 million low-wage workers in those three cities. The numbers are astounding. Twenty-six percent of the workers in their sample were paid less than the minimum wage, and two-thirds of those were stiffed by more than $1 an hour. Seventy-six percent were not paid for overtime they worked the previous week — 11 hours of it, on average. Two-thirds were denied legally required meal breaks, and half of those who were injured and tried to claim workers compensation were subjected to some form of illegal retaliation.

Some industries, like construction and education, had relatively low rates of wage theft — 12 to 13 percent; restaurants, grocery stores, and warehouses fell in the mid-range of 20 to 25 percent; textile and clothes manufacturing and other services hit 40 percent; and a whopping 66 percent of child care workers endured minimum wage violations, and 90 percent put up with overtime violations.

Race and gender played big roles. Women saw minimum wage violations at significantly higher rates than men. Wage theft was three times higher for blacks than for whites, and highest of all for Latinos. Employees at smaller businesses were more at risk, as well as employees with less education — though wage theft happens often even to the college educated.

Total wage theft in just those three cities amounted to almost $3 billion annually. The Economic Policy Institute estimated that if the patterns the study found are generalizable for the entire country, wage theft is $50 billion a year.

The Department of Labor only has 1,000 to 1,100 staff members looking into violations of wage and hour laws for the entire country. The Obama administration has requested an increase in funding for enforcement at least three times, but Congress has denied them. Wage theft is usually treated as a civil matter or dealt with by fines, and employers very rarely go to jail for it — a Papa John's franchise owner made headlines in 2015 when he was sentenced to a mere 60 days.

Compare that to the thousands of poor and non-white Americans who spend months, years, or even their entire lives in prison for petty theft or drug possession.

Prosecutors and labor groups seem to be getting more aggressive about pursuing wage theft. And several senators are pushing a bill to increase staffing and funding to go after wage theft, and to crank up penalties, regulations, and recovery of back pay.

But for now the consequences remain paltry. And the crime spree continues.