No Minimum Wage Without Help From States

Millions of Americans have their wages illegally withheld from them, what is known as ‘wage theft’

As the push to raise the federal minimum wage gains momentum it is surprising many that millions of Americans are still receiving less than the current $7.25 standard every year. It is a sensible tactic to advocate for a Congressional bill that would raise the minimum to $10.10 an hour, or the more ambitious $15, since many economists believe to could lift 4.6 million Americans out of poverty. But even if federal legislation is considered, an annual estimate of $50 billion is illegally withheld from workers, mainly in low-wage industries, an increasingly common crime known as ‘wage theft’. Victims of wage theft are often forced to clock out while still working, worked long hours without overtime pay and in some cases not paid at all.

The surge in wage related complaints has caught the attention of President Obama who requested Congress for an additional 300 investigators to be added to the U.S Department of Labor’s Wage and Hour division. In addition, labor activists have called for an increase in the penalty for wage theft perpetrators as the maximum fee currently stands at $1,100, even for repeat offenders.

But even if the President gets his wish of 1,400 USDOL investigators it is difficult for the federal bureau to monitor the 140 million+ US workers without help from the state and municipal levels. This makes it no surprise that the swell in wage-theft claims has come predominately from states with strong labor departments-California, New York and Illinois being the prime examples. In fact, a 2014 wage theft study from Economic Policy Institute, collected most of their data specifically from Los Angeles, Chicago and New York City.

The national $50 billion national wage theft figure mentioned earlier was determined by extrapolating from the data collected mainly from New York City, Los Angeles and Chicago. It is hardly scientific to use labor trends in New York City and apply them to the rest of the country. Some conservative analysts see the growth in wage-theft claims as a result of overly aggressive litigators that are commonly seen in the country’s liberal pockets.

But it is actually impossible to know if these studies represent a nationwide epidemic or not since there are 7 states that do not enforce wage or hour laws at all. Louisiana, Tennessee, Alabama, Mississippi, South Carolina, Georgia and Florida defer to the USDOL Wage & Hour Division if a worker is being paid less than $7.25 an hour or nothing at all. The states have their version of labor departments that are primarily tasked with maintaining the integrity of the Unemployment and Worker’s Compensation funds, and in many cases handle complaints of discrimination. While these functions are all important, workers who are denied owed pay will have to hope the federal USDOL will be able to hear their case, or to take up the matter individually in civil court, a potentially expensive alternative.

Louisiana’s History Of Wage Theft

It is a bit perplexing that these states choose not to investigate wage-theft considering that many already have a record of abuse- especially Louisiana after Hurricane Katrina.

Luz Molina, Professor of Loyola and leader of the Workplace Justice Project, is one of the few resources day laborers have against employers who withhold wages. Her clients, predominately Latino immigrants as they tend to be the most venerable, face a costly and complex system for restitution that usually requires that the individual take their employer to court.

The US Department of Labor, has advocated for day laborers of New Orleans before but mainly for large class actions due to finite resources. If a victim of wage theft chooses to go through Louisiana state court, the filing fee is $505.50. In Orleans Parish court, the filing fee is roughly $375. Besides filing fees, there are several other costs that may arise which are nearly impossible to navigate without strong, and often costly, legal council. For example, some of Molina’s clients have employers who avoid court appearances,

“They hide from service. So you may have to hire a private process server to find this person. There are several fees that could arise”. And of course victims who do not speak Spanish have to hire their own translator since the state courts do not accommodate foreign-language services. The expensive route of litigation is disheartening enough for many wage theft victims to simply hope it does not happen again.

The amount of wage-theft and employer abuse in general has dropped significantly since the lawless days of the Katrina aftermath. The Sheriff of New Orleans decision to end immigrant detention requests, coupled with action finally taken by the USDOL against the worst contractors, helped restore some sense of regulation in the labor market. However, Molina continues to hear of cases of wage theft from clients.

Not Just An Issue For Immigrants

Without the threat of deportation, a common tactic by committers of wage-theft, native-born Americans are simply not as vulnerable to workplace abuse as immigrant laborers. But the idea that wage theft is only an issue for undocumented workers is simply not true.

In 2009, the National Employment and Labor Program produced one of largest studies on workplace abuse to find that 68 percent of surveyed workers had experienced at least one wage related violation in the previous week. A shocking finding was that female workers were much more likely to be paid less than the minimum wage than males. Undocumented immigrants were of course the most likely to be paid less than the minimum wage with 47.4% of females reporting a recent violation. But US born workers still reported a considerable level of wage theft with African Americans leading the pack at a rate of 19%- three times more than their Caucasian counterparts.

The $933 million of withheld wages that was recovered in 2012 is a massive amount that absolutely included many native-born Americans in low-wage industries. But even without the threat of deportation, native-born Americans were also unlikely to report their lost wages. In fact, annual wage theft is probably well over a billion dollars but without proper data collection only a very rough estimate can be given.

This brings us back to business & trade groups that see quadrupling of wage theft complaints within the past 12 years is an issue exaggerated by liberal organizations. It is possible that where it is easier to file a wage related complaint, like New York City, statistics on wage theft can be inflated. But then similar logic of incentives would indicate that New York City employers would be far less likely to defy wage & hour laws within a state that favors employee restitution. It is likely that wage theft is as prevalent here as in New York City; it may be more so considering Louisiana’s laissez-faire approach to labor rights.

Would an increase in the federal minimum help low-wage workers? Studies show that the answer is, yes. But no law is effective if there is no enforcement. The USDOL has had success in compensating workers, of all legal statuses, but only has the resources to see a fraction of the cases. It makes sense why progressive activists in deep-red states like Louisiana have moved away from the state level, and pushed for federal legislation on the minimum wage. That said, more stringent enforcement mechanisms for labor violations on the state level are needed in order for the minimum wage to be realized for everybody.