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Wage Theft: The New American Crime?

Research & Commentary
August 13, 2014

by Robert Ross

Each year, American workers are robbed of far more money in wage theft than bank, convenience store, street, and gas station robberies combined.

By Robert J.S. Ross

Each week, millions of dollars are stolen from American families. The perpetrators act with impunity. There are no arrests, few convictions, and largely meaningless fines.

Many working people are paid less than the legal minimum, not paid for overtime, and deprived of legal protections.

Many working people are paid less than the legal minimum, not paid for overtime, and deprived of legal protections.

What is this crime wave in America? Wage theft.

Many working people are paid less than the legal minimum, not paid for overtime, made to work off the clock, and deprived of legal protections through false classification as independent contractors. If economic losses like these were visited upon big brand retail stores or well-healed neighborhoods, the cry for strict law enforcement would force police chiefs and mayors into rapid response.

A groundbreaking study of low wage industries – including apparel, restaurants, car washes, and construction – found that 26 percent of workers were paid less than minimum wage, 75 percent of those who worked overtime did not receive overtime pay, 25 percent were forced to work before or after their shifts had ended, and a vast majority of this work – 70 percent – was completely “off-the books.”

This 2008 study revealed that the economic losses incurred by wage theft victims are massive. [pullquote] The economic losses incurred by wage theft victims are massive.  [/pullquote]

The authors noted, “Assuming a full-time, full-year work schedule, we estimate that these workers lost an average of $2,634 annually [ $51/week] due to workplace violations, out of total earnings of $17,616. That translates into wage theft of 15 percent of earnings.”

The study was a sample representative of a population of about 1.64 million workers, or 15 percent of the combined workforce of Chicago, Los Angeles and New York.

Let’s do the math: 1.64 million x $51 (per week) is theft of $83.6 million per week and $4.3 billion (yes billion) per year – in just those three cities. [pullquote] One study estimates that wage theft victims lose 15 percent of their earnings on average. [/pullquote]

A crime wave, indeed.

As Ross Eisenbray of the Economic Policy Institute points out, “Wage theft is a far bigger problem than bank robberies, convenience store robberies, street and highway robberies, and gas station robberies combined. According to the Department of Justice, these street crimes amounted to $139 million worth of stolen money in 2012. In the same year, the Department of Labor recovered more than twice that amount – $280 million – in stolen wages.

Enforcing minimum wage and overtime laws is the responsibility of the U.S. Department of Labor. Unfortunately, the DOL no longer has adequate capacity to enforce these laws. [pullquote] The Department of Labor no longer has the capacity to enforce minimum wage and overtime laws. [/pullquote]

My study of the apparel industry, for instance, found that the number of investigators in relation to the workforce assigned to Fair Labor Standards Act enforcement had seriously degraded – by about one-third – from the 1950s to around 2000. Likewise, a study conducted by the Brennan Center at New York University Law School found that the number of investigators fell by 14% while the number of establishments covered by the law grew by 114% from 1975-2004.

When faced with a surge in crime, it is not usual American practice to reduce police budgets and trim the number of law enforcement personnel – but that is exactly what has happened in this case.

Given the impasse in Washington, labor activists are gathering momentum to enact local protections. In Boston, Central Labor Council Secretary Rich Rogers said, “We are currently working with the Walsh administration and the Boston City Council to re-constitute the ‘Living Wage’ commission and adopt a strong ‘ Wage Theft’ ordinance in the city of Boston.” [pullquote] Labor activists around the country are working to enact local protections against wage theft. [/pullquote]

According to Darlene Lombos, of Community Labor United (CLU), “The electoral alliance between labor and communities of color, in last year’s election, is continuing to work together to move a working families agenda in Boston.”

CLU is working with City Councilors to draft an ordinance that will more strongly regulate the responsibilities of firms that contract for labor services. Across the city, widespread support for the idea of a “Wage Theft”  campaign is starting to develop.

In the case of wage theft, justice will come when local communities stand with the victims and help them fight back.

Clark University sociologist Robert Ross is a member of the Board of Directors of the Sweatfree Purchasing Consortium. He is the author of Slaves to Fashion: Poverty and Abuse in the New Sweatshops.

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