Greedy Hands in Empty Pockets

If you’d like a break from the IS-talk today, but have some anger you’d like to transfer, check out Danny Vinik’s piece at TNR on wage theft: the massive income loss American workers experience when they are denied wages and benefits they are owed by their employers. It’s the subject of a new report from the Economic Policy Institute.

What is wage theft? It’s when employers refuse to pay their workers their rightful wages and benefits, such as refusing to pay overtime. It’s a major problem across the United States. One study, which EPI cites, examined three cities (New York, Chicago and Los Angeles) and found that two-thirds of workers in low-wage industries had experienced a pay-related offense in any given week in 2008. Those violations cost workers more than $2,600 a year on average—nearly 15 percent of their total earnings. If wage theft is as prevalent in the rest of the United States as it is in New York, Chicago and Los Angeles, then it costs workers more than $50 billion a year.

It’s tough to calculate how widespread wage theft is because much of it goes unreported. But not all. The U.S. Department of Labor, state departments of labor, state attorneys general, and private attorneys file cases on behalf of workers to recover lost wages. No single database collects this information so EPI consulted with state labor departments and attorneys general and researched private civil litigation cases to estimate the total amount that workers recovered in wages. In 2012, it totaled at least $933 million. In fact that understates the total since the researchers didn’t receive data from six state departments of labor and five attorneys general.

Remember, the actual amount recovered is only a fraction of the total wage theft. In other words, wage theft totals billions of dollars every year.

As Vinik notes, the most obvious way not only to rescue workers from wage theft but to deter it is to create a full-employment economy where people have the opportunity and leverage to talk a walk in pursuit of fair treatment and higher compensation. Barring that, yes, that ol’ debbil Guvmint Regulation, so hated in the abstract, is the best way and the only way to investigate and punish greedy, thieving employees.

What can we do about this? EPI recommends doubling the number of investigators in the Department of Labor’s Wage and Hour Division from 1,100 to 2,200. For his part, President Obama has asked for an additional 300 investigators. But that alone isn’t enough. EPI also wants to significantly stiffen the penalties for wage violations. Currently, the maximum civil penalty is just $1,100. Much higher fines would make companies think twice before stealing their workers’ wages.

If there was an equivalent rash of other kinds of theft, we’d hear all kind of demands for government action. This one should be no different.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.