May 10, 2017
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.
Introduction and key findings
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.