In an era where income inequality is escalating at an alarming rate, there exists a silent and often overlooked thief – wage theft.
Affecting millions of workers worldwide, this nefarious practice robs individuals of their hard-earned money, perpetuating cycles of poverty and socio-economic stagnation.
Our understanding of wage theft has been largely hazy and unformed, partly due to its clandestine nature and partly due to the absence of spotlight. But the silence must be shattered.
This article dives into the world of wage theft, bringing to the forefront shocking statistics that illuminate the extent of this global problem.
From the unsuspecting worker to the multibillion-dollar industries, no one is immune. Prepare to unveil the reality behind your paycheck and discover whether you, too, have fallen victim to this silent epidemic.
An Introduction To Wage Theft
There are different types of wage theft.
Some may not even appear like wage theft at first glance.
Like how, for example, some companies give their employees managerial titles so that they can have them exempted from overtime pay. As a result, these companies have been estimated to avoid about 13.5% of their overtime expenses.
In simple terms, wage theft is not receiving what you have rightfully and honestly earned.
Paying less than minimum wage, requiring off-the-clock work, misclassification of employees, and not paying out overtime pay are all considered the most common types of wage theft.
Other types of wage theft include tip skimming, not paying for remote work, various meal break violations, and even non-monetary payments.
While all those practices are considered illegal they are way more common than one may expect.
How Much Is Wage Theft Costing Workers per Year?
According to the estimates from the Economic Policy Institute wage theft in the US costs workers more than $50 billion per year.
In fact, this number exceeds all burglaries, motor vehicle thefts, and larceny-thefts combined when we compare the numbers with the data from the FBI.
As a result wage theft is considered one of the largest forms of theft in general in the United States.
Even though the actual number of wage theft cases in the US is not known, according to the Economic Policy Institute in the period between 2017 and 2020 more than $3 billion in wage theft were recovered.
Considering the $50 billion and more lost each year, despite this being good news, it is clearly nowhere near enough the actual numbers.
The Most Common Type of Wage Theft
The most common type of wage theft is overtime violations followed by employee misclassifications, rest and meal break violations, and off-the-clock work violations.
Other very common types of wage theft include paying less than the minimum wage followed by not paying for social security, unemployment, and medical insurance, withholding holiday pay, making illegal deductions, and shorting hours.
Less common types of wage theft include tip skimming, reimbursing and random money deductions, paycheck mistakes, timecard manipulations, and not paying the final check of a worker that has left.
There is one type of wage theft that is specific to Australia. It is connected to employers not paying the superannuation of their employees (A type of retirement investment fund).
In the period between 2009 and 2013 about 1.3 billion AUD of unpaid superannuations were recovered by the Australian Tax Office.
Work Practices Associated With Lower Wage theft
The Broken Laws Report found several interesting correlations.
Employers that offer health insurance, provide paid vacations and sick days, and offer regular pay raises have been found to be significantly less likely to commit wage theft.
This is not all that surprising considering those would also be employers that are likely to try and invest in their employees.
People Most Likely to Be Victims of Wage Theft
People working in low-wage industries are more likely to experience minimum wage violations.
Also, throughout all studies and reports illegal workers suffered the highest rates of wage theft. This is not a surprise since they are in a very disadvantageous position to begin with, which is often abused by employers.
For example, one paper found that about 17% of people working in low-wage industries were victims of minimum wage theft.
Another publication on low-wage workers in New York City, Chicago, and Los Angeles found the number to be higher, around 26%.
According to the Broken Laws Report, 68% of workers were victims of at least one wage theft in the week before the report was conducted.
According to the data provided by the US Department of Labor, the highest amount of total back pay per employee was found in industries such as apparel manufacturing, janitorial services, construction, hotels and motels, and landscaping services.
More information can be found in the table below.
|Industry||Cases||Employees||Percentage of Cases per Employees||Back Wages||Average Back Wages per Employee|
|Hair, Nail & Skin Care Services||76||207||36.7%||$275,896||$1,333|
|Child Care Services||347||1,190||29.2%||$545,157||$458|
|Hotels and Motels||595||3,018||19.7%||$4,636,891||$1,536|
Jobs where the payment was non-hourly based, the payments were made in cash as opposed to a check, and companies that had less than 100 employees all correlated with a higher likelihood of wage theft.
California is often considered the state with the highest incidence of wage theft. On average, about 30% of workers in Los Angeles County are paid less than minimum wage which amounts to $26 to $28 million per week.
In terms of overall wage theft, California is followed by New York, Illinois, Pennsylvania, Florida, New Jersey, Massachusetts, Texas, and Ohio, according to some sources.
According to the Center for Popular Democracy, about 2.1 million workers in New York are estimated to experience some form of wage theft each year, which adds up to about $3.2 billion in owed wages.
Minimum Wage Violations
The findings by the Economic Policy Institute from 2017 and some other sources suggest very interesting trends.
Industries and Occupation
According to the EPI, workers in the food and drink service, agriculture, forestry and fishing, leisure and hospitality, and retail are more likely to experience minimum wage violations.
The occupations with the most minimum wage violations were service, sales, office and administrative support, transportation, professional, and management.
Part-time workers are about 3.5 times more likely to be the victim of a minimum wage violation compared to full-time employees.
Lastly, non-union-covered workers are almost twice as likely to experience minimum wage violations than union-covered employees.
The Broken Laws Report from 2009 also found very interesting trends. The industries with the highest minimum wage violation rates were apparel and textile manufacturing (42.6%), personal and repair services (42.3%), private households (41.5%), retail and drug stores (25.7%), grocery stores (23.5%), security, building, and grounds services (22.3%).
When breaking this down by occupation we can see that childcare workers (66.3%), beauty, dry cleaning, and general repair workers (49.6%), and sewing and garment workers (43.2%) had the highest rates of minimum wage violations.
The report expands on that showing that about 60% of workers were underpaid more than $1 per hour, of which almost 10% were underpaid $4 or more per hour.
The average underpayment of minimum wage employees was calculated to be about $1.43 less than the minimum wage.
|Amount Paid Below the Hourly Minimum Wage for Workers Suffering Minimum Wage Violations||Percentage of Workers|
|Up to $1.00||39.9%|
|$1.01 to $2.00||25.6%|
|$2.01 to $3.00||16.3%|
|$3.01 to $4.00||8.7%|
|$4.01 or more||9.6%|
Also, 14% of employees were victims of tip stealing by their superiors and about 30% of tipped workers were not paid the minimum tipped worker wage.
According to the findings by the Economic Policy Institute in the period between 2013 and 2015, women are more likely to experience minimum wage violations than men 55.1% to 44.9%.
On average, 4.9% of women experienced minimum wage violations whereas only 3.5% of men experienced the same issues. The average weekly wages stolen were fairly similar at $64 for men and $63 for women.
The Broken Laws Report Report also found that foreign-born women were nearly twice as likely to be the victim of a minimum wage theft compared to US-born women and women who are unauthorized immigrants observed the highest rates.
Furthermore, workers in the age group between 16 to 24 were three times as likely to experience minimum wage violations compared to older employees. Nearly 10% of young employees are paid below minimum wage.
|Age||Amount of Employees Experiencing Minimum Wage Theft|
According to EPI “Workers of color are more likely to suffer minimum wage violations than white workers”. The same applies to Non-U.S. citizens and workers with less than a high school diploma who were also more likely to suffer such violations.
Generally higher educated workers are less likely to suffer from minimum wage violations, however, even college-educated workers were still at high risk.
Minimum Wage Connection
Unfortunately, and somewhat unsurprisingly, it has been found that a raise in the minimum wage corresponds with a raise in minimum wage violations, especially with younger workers ages 16 to 25.
Also, a legislation increase in the minimum wage is associated with a larger increase in minimum wage violations compared to inflation-driven minimum wage increases.
Generally, unpaid overtime work is on the rise.
The total number of overtime violation cases in 2011 was 11,990 and nearing a total of $140 million in due overtime wages.
This was a notable increase compared to 2010 when the cases were 8,788 netting about $107 million.
The data from one study from 2020 showed that during the pandemic the average American worker was expected to put in about 7 hours of overtime every week. What’s more, 20% of workers will work overtime and not get paid for it.
The data from the study conducted in New York City, Los Angeles, and Chicago, mentioned earlier, discovered that 76% of low-wage workers that worked overtime were victims of overtime violations.
Furthermore, the average worker had about 11 hours of overtime that would either be not paid or underpaid.
|Number of Hours Worked Overtime for Workers Victims of an Overtime Violation||Percentage of Workers|
|Up to 5 hours||35.4%|
|5 to 10 hours||25.6%|
|10 to 20 hours||26.5%|
|More than 20 hours||12.4%|
A 2019 survey in Australia found that workers across the whole board were suffering from unpaid overtime.
What was found was that full-time workers had on average 5.18 hours of unpaid overtime per week. That number was 6.27 hours per week for the self-employed, and 3.58 hours per week for the part-time workers.
According to the Broken Laws Report, the industries with the most overtime violations were personal and repair services (91.8%), private households (88.6%), and retail and drug stores (83.4%).
When categorized by occupation, the occupations with the highest rates of overtime violations were childcare workers (90.2%), office clerks and couriers (86%), home health care workers (82.87%), and beauty, dry cleaning, and general repair workers (81.9%).
One report on employee misclassifications can shed some very worrying trends.
In 1984 it was estimated that about 15% of employers were misclassifying some of their employees. And in a 2000 study, it was found that roughly between 10 to 30% of audited employers were misclassifying some of their workers.
In the period between 2000 and 2007, the number of misclassified worker cases discovered by state audits grew from 106,000 to 150,000 per state.
Considering that state audits usually affect less than 2% of all businesses this can put things into perspective of how serious the issue could be.
Those trends continue even today.
For example, a 2021 report that examined construction workers in Illinois, Minnesota, and Wisconsin found that about 10% were misclassified.
In a National Employment Law Project (NELP) report it was discussed that about 90% of employers in California examined in the period between 2017 and 2018 did not fully comply with the state’s misclassification laws.
Wage Theft is a Low-Risk Crime
As it stands, wage theft is not reported as frequently as it should be.
An underlying problem for this could also be the fact that the repercussions are oftentimes not very serious and even then many employers are able to get away with it.
For example, in the period between 2005 and 2020, The Labor Department’s Wage and Hour Division penalized only 1 in 4 of the repeat offenders.
That said, in only 14% of the cases the agency required the companies to pay some penalty money in addition to the wage already owed.
And again many employers did not end up paying the total amount of wages owed to their employees as the data shows that since 2005 about 16,000 employers were able to get away with not paying about a little over $20 million in wages owed to their employees.
In essence, it is cheaper to break the law than to follow it, which is something that has caused very heated discussions over the years. The data shows that every year between 2005 and 2019 the amount owed was higher than the total amount returned to employees.
According to the data compiled by CBS News of more than 650,000 complaints it was found that about half of the workers would win their complaints but that didn’t mean much. It was further discovered that about a little less than two-thirds of these complaints would end up in a successful money recovery.
What makes matters worse is how long wage theft complaints take to be decided. Often they last months and even more than a year.
Back Pay Return Rates
In 2019 the U.S. Department of Labor’s WHD (Wage and Hour Division) was able to return $322 million in wages that were owed to employees or about $1,025 per employee on average in due back wages.
This number has been steadily growing over the past years with a total of $1.4 billion in recovered back wages for the period between 2015 and 2019.
|Fiscal Year||Back Wages Collected||Average Back Wages Owed per Employee|
Wage Theft Effects on Health
Wage theft is not just a pay problem.
Generally, wage theft pushes people into poverty which can have a serious negative impact on one’s health.
Low wages and a general feeling of insecurity can lead to problems with finding suitable housing and paying for rent, affording heating, food, and more.
The results can be hard to assess as they can range from homelessness, decreased mobility, hunger, and time poverty, to depression, inability to pay for medical care, medications, and basic amenities and products.
Wage theft and related violations can lead to burnout and higher rates of stress (something that was particularly evident during the pandemic in the health sector), social distancing, less time spent with family and friends, and less time for sleep and physical activity.
According to the findings of the report conducted by the Human ImpactPartners all that can even lead to chronic illnesses and the inability to manage one’s health properly.
For example, according to the Broken Laws Report, about 69% of the workers didn’t receive a break even though they were eligible for one, had a shortened break, or were required to work through the break.
What’s more, one study found that workers who had access to paid sick leave were 28% less likely to be injured compared to workers that did not have access to paid sick leave from their employer.
But if that is not enough, the data shows even more interesting trends in that regard as well.
About 50% of the employees who experienced a serious injury while on the job and reported it to their employer would end up being a victim of another violation. For example, they can get laid off or asked to not file any reports. In some instances, the employer would even call the immigration authorities.
On top of that, around 33% had to pay out of pocket for their health care expenses and 22% used their health insurance to cover medical bills.