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

Abstract

Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

How Do Firms Respond to Minimum Wage Increases? Understanding the Relevance of Non-Employment Margins

“…This question is difficult to answer due to measurement error concerns in self-reported wage data. Clemens and Strain (2020b) devote significant attention to measurement error as a potential source of the appearance of subminimum wage payment in the Current Population Survey. Their analysis of recent minimum wage changes estimates that noncompliance has averaged roughly 14 to 21 cents per $1 of realized wage gain.…”

“…Enforcement of minimum wage laws may reduce evasion but risks exacerbating adverse effects on workers. As Clemens and Strain (2020b) emphasize, this "trade-off between shortrun economic efficiency and respect for the rule of law is not one to be taken lightly." After all, the quality of governance, or "social infrastructure," has long been understood to be an important determinant of long-run growth and economic well-being (Hall and Jones 1999).…”

Does Minimum Wage Increase Labor Productivity? Evidence from Piece Rate Workers

“…14 See Ashenfelter and Smith (1979) and Clemens and Strain (2020) for discussion on employer noncompliance with the minimum wage.…”

The New Realities of Working-Class Jobs: Employer Practices, Worker Protections, and Employee Voice to Improve Job Quality

“…Recent research suggests that employers may more aggressively violate the law in a legal context that demands a higher wage floor. Clemens and Strain (2020) use CPS data to investigate employer noncompliance with minimum wage increases from 2011 to 2018 in a sample of nontipped hourly workers aged 16 to 25 years who are not subject to overtime or commission pay. They conclude that most employers complied with minimum wage laws during this period; however, violations in the form of subminimum wage payments were more prevalent in states that enacted minimum wage increases.…”