Deterring Wage Theft: Alt-Labor, State Politics, and the Policy Determinants of Minimum Wage Compliance

Abstract

Can stronger state-level public policies help protect workers from “wage theft?” In recent years, workers' rights groups have responded to policy drift and legislative inaction at the national level by launching campaigns to enact stronger penalties for wage and hour violations at the state level. Many of these campaigns have been legislatively successful and formative for the development of “alt-labor.” But are such policies actually effective in deterring wage theft? Previous scholarship has long concluded that although stronger penalties should theoretically make a difference, in practice, they do not. But by confining the analysis to the admittedly weak national-level regulatory regime, the existing literature has eliminated all variation from the costs side of the equation and overlooked the rich variety of employment laws that exist at the state level. Using an original dataset of state laws, new estimates of minimum wage violations, and difference-in-differences analyses of a dozen recently enacted “wage-theft laws,” I find that stronger penalties can, in fact, serve as an effective deterrent against wage theft, but the structure of the policy matters a great deal, as does its enforcement. The implications for workers' rights and the changing shape of the labor movement are discussed in detail.

Understanding “Wage Theft”: Evasion and Avoidance Responses to Minimum Wage Increases

“…Change in Subminimum Wage Incidence and Change in Effective Minimum Wage: This figure plots the difference in the share of hourly workers against the difference in the effective minimum wage between 2011-2012 and 2016-2017 by state. Blue dots represent states with values of theGalvin (2016) wage theft penalty index below the median and red dots are states above the median. Dot sizes are proportional to state population.…”

Economic Inequality and the Violation Economy

“…Yet Congress has not adjusted the provisions of the act to keep pace with a growing and changing economy. While the number of workers who fall under the protection of the Fair Labor Standards Act has grown sixfold since 1948, the number of investigators in the Wage and Hour Division only increased by 10 percent in the same time (Galvin, , p. 325). While some individual states have passed laws to pick up the slack, policies have varied widely in their effectiveness (Galvin, ).…”

“…While the number of workers who fall under the protection of the Fair Labor Standards Act has grown sixfold since 1948, the number of investigators in the Wage and Hour Division only increased by 10 percent in the same time (Galvin, , p. 325). While some individual states have passed laws to pick up the slack, policies have varied widely in their effectiveness (Galvin, ). In such a policy vacuum, it is no surprise that issues like wage theft run rampant, as it hinges on a practical incentive: more money for the employer.…”

“…When regulators are unable to enforce workplace standards due to a lack of resources or standing, employers have an incentive to flout labor laws to reduce costs and enhance profits and routinely do so. This is especially true if the chances of being caught are low, or if violations do not carry serious punishments (Galvin, ). Further, these problems are more prevalent with a low‐wage workforce, where employers can easily replace workers.…”

Roundabout wage theft: The limits of regulatory protections for Ontario workers in precarious jobs

“…Despite the fact that workers in precarious jobs in Ontario, Canada, are protected through minimum standards established through the Employment Standards Act (ESA), many workers face wage theft. Wage theft is defined as “the failure of employers to pay their employees the full amount they have earned and to which they are legally entitled.” Minimum wage noncompliance and overtime violations are the most common forms of wage theft (Galvin, , p. 325). Researchers have documented numerous overt forms of wage theft which workers in precarious jobs face (Vosko et al, ).…”