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News from EPI Wage Theft Costs American Workers as Much as $50 Billion a Year

Wage theft is a nationwide epidemic that costs American workers as much as $50 billion a year, a new Economic Policy Institute report finds. In An Epidemic of Wage Theft Is Costing Workers Hundreds of Millions of Dollars a Year, EPI Vice President Ross Eisenbrey and EPI intern Brady Meixell examine incidences of wage theft—employers’ failure to pay workers money they are legally entitled to—across the country. The total amount of money recovered for the victims of wage theft who retained private lawyers or complained to federal or state agencies was at least $933 million in 2012, almost three times greater than all the money stolen in robberies that year. However, since most victims never report wage theft and never sue, the real cost of wage theft to workers is much greater, and could be closer to $50 billion a year.

“Wage theft affects far more people than more well-known crimes such as bank robberies, convenience store robberies, street and highway robberies, and gas station robberies combined, and can be absolutely devastating for workers living from paycheck to paycheck,” said Eisenbrey. “For low-wage workers, the wages lost from wage theft can total nearly 10 percent of their annual earnings.”

The authors also conducted a study of workers in low-wage industries in New York, Chicago, and Los Angeles and found that in any given week, two-thirds experienced at least one pay-related violation.  They estimate that the average loss per worker over the course of a year was $2,634, out of total earnings of $17,616. The total annual wage theft from front-line workers in low-wage industries in the three cities approached $3 billion. If these findings are generalizable to the rest of the U.S. low-wage workforce of 30 million, wage theft is costing workers more than $50 billion a year.

“Wage theft is another unnecessary obstacle preventing America’s families from getting ahead, yet we are barely addressing it,” said Eisenbrey. “Offices tasked with combating wage theft are severely under resourced and understaffed, and several states closed down or cut back their labor departments, leaving workers even more vulnerable to exploitation.”

The authors recommend Congress immediately grant President Obama’s request to add 300 investigators to the current staff of the DOL’s Wage and Hour Division and eventually double it, along with the associated staff in the office of the Solicitor of Labor, which prosecutes the division’s cases. Congress should also enact several currently pending amendments to appropriation bills that would prohibit the award of federal contracts to firms convicted of wage and hour violations. Finally, the penalties under federal law for willful and repeat violations of the law are minimal. The fines should be increased to deter violations and to make it economically unwise to violate the law.