Wage Theft: A Widespread Problem

Wage Theft

Wage Theft

DUBUQUE– Americans like to think that a fair day’s work brings a fair day’s pay. In today’s labor market, however, wage theft annually amounts to billions of dollars and affects millions of wage earners. Victims include U.S. citizens and immigrants; men and women of every race and ethnicity; and both full-time and contingent workers.

Employers who commit wage theft rob federal and state treasuries of many billions of dollars of revenue through tax and payroll fraud. By cheating workers out of wages, these employers also depress consumer spending and stunt economic growth.

Survey research shows that about two-thirds of low-wage employees suffer wage theft. The withholding of wages or benefits rightfully owed to an employee takes several forms: failure to pay overtime, minimum wage violations, illegal deductions in pay, employee misclassification, and working off the clock.

While wage theft occurs in all industries, it is especially prevalent in restaurants. A recent poll found that 90 percent of fast-food workers report having wages stolen from them. Restaurant workers hold seven of the 10 lowest-paying occupations in the U.S., earning less on average than farm workers and all other domestic workers. Although the industry has grown steadily over the last twenty years, restaurant workers continue to earn significantly less than workers in almost every other industry, forcing them into public assistance programs.

The average fast-food CEO made nearly $24 million last year, four times more than the average in 2000. By contrast, the average hourly wage for employees increased just 0.3 percent in real dollars since 2000. Taxpayers actually bear a double burden. In addition to the money in food stamps, Medicaid and other government assistance impoverished fast-food workers need to survive, taxpayers also underwrite CEO compensation by allowing deductions for so-called “performance pay.”

Over the past year or so, you’ve probably seen news coverage of the strikes and other job actions fast-food workers have taken against their employers. And wage theft lawsuits have been filed against such giants as McDonald’s, Pizza Hut and Taco Bell.

While those at the bottom of the wage scale are hardest hit, wage theft can be found across the employment spectrum. For example, payroll fraud also impacts people like engineers, financial advisers, adjunct professors, and IT professionals.

Most wage theft goes largely unreported because workers fear losing their jobs, many don’t know their rights, and some don’t even realize the robbery. When reported to authorities, months elapse before the completion of an investigation. And criminal charges are rarely filed. Besides, almost half of workers surveyed nationwide have experienced some form of illegal retaliation, like firing or suspension, when they file complaints.

Right now, government agencies charged with recovering lost income are largely ineffective. Few local governments have the resources or staff to combat wage theft, and several states have shut down or severely cut back their labor departments, leaving workers largely unprotected and vulnerable to exploitation. With only 1,000 investigators to oversee about 7.3 million business establishments employing 135 million workers, officials at the Wage and Hour Division of the Department of Labor concede that violators have a good chance of not getting caught. Even when compelled by judgments or settlements to pay back wages, some employers disappear or go out of business before victims can collect.

Communities, activists, and unions have mobilized to address the problem and scored some victories in several states, cities, and counties, but much more needs to be done. In order to stop wage theft, we need stronger worker protection laws, more enforcement of wage and hour regulations, a lower rate of unemployment, a rise in the minimum wage, and public accountability of individual employers who commit these violations.

Ralph Scharnau teaches U. S. history at Northeast Iowa Community College, Peosta.  He holds a Ph.D. from Northern Illinois University.  His publications include articles on labor history in Iowa and Dubuque.  Scharnau, a peace and justice activist, writes monthly op-ed columns for the Dubuque Telegraph Herald.

This entry was posted in Labor and tagged , , . Bookmark the permalink.