EPI Report * By Celine McNicholas, Zane Mokhiber, and Adam Chaikof
December 13, 2017
What this study finds: In 2015 and 2016, a total of $2 billion in stolen wages ($880.3 million in 2015; $1.1 billion in 2016) were recovered for workers by the U.S. Department of Labor ($246.8 million in 2015; $266.6 million in 2016); by state departments of labor and attorneys general in 39 states ($170.0 million in 2015; $147.5 million in 2016); and through class action settlements ($463.6 million in 2015; $695.5 million in 2016). These represent wages stolen by employers who, for example, refuse to pay promised wages, pay employees for only some of the hours worked, or fail to pay overtime premiums when employees work more than 40 hours in a week.
Why it matters: Given that wage theft disproportionately affects workers from low-income households-who are already struggling to make ends meet-the loss of wages can be devastating. And these recovery numbers likely dramatically underrepresent the pervasiveness of wage theft-it has been estimated that low-wage workers lose more than $50 billion annually to wage theft. Regardless of what share of actual wage theft the recovery numbers represent, these data are one more reminder that wage theft is not isolated to a few bad employers, but affects workers much more broadly.
What can be done about it: Implement legislation to improve pay transparency; increase penalties for wage theft violations; support strong government enforcement of wage and hour laws; protect workers from retaliation when they report violations; and protect worker rights to collective and class action.
The last four decades have been marked by rising wage inequality, with the vast majority of American workers experiencing wage stagnation while those at the top rung of the economic ladder reap the benefits of growth in productivity. These dynamics mean that many workers struggle to make ends meet; in 2016 one in fivefamilies in which at least one person worked were living below 200 percent of the federal poverty line (U.S. Census Bureau 2017).1 This situation is deeply exacerbated by wage theft, which continues to rob workers of billions of dollars in earned pay each year, with low-income workers being disproportionately affected (Bernhardt et al. 2009).
Wage theft occurs when employers fail to pay workers the full wages to which they are entitled for their labor. This includes, for example, refusing to pay workers the total amount of promised wages, not paying for time spent preparing a workstation at the start of a shift or closing up at the end of a shift, and not paying overtime premiums to workers who work more than 40 hours a week. Consider a full-time minimum wage worker earning the federal minimum wage of $7.25 an hour, around $15,000 per year. If this worker’s employer asks her to work 15 minutes “off the clock” before and after her 8-hour shift each day, that extra half hour of unpaid work each day represents a loss to the worker (and a gain to the employer) of around $1,400 per year, including the overtime premiums she should have been paid. This constitutes theft of nearly 10 percent of a minimum wage employee’s annual earnings-which can mean the difference between paying the rent and utilities or risking eviction or the loss of gas, water, or electric service.