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.

Only Politicians Can Hold Oil Companies Responsible, Not Public Advocates

The relationship that Gov. Jindal has with the oil & gas industry has been further illuminated this week. Not only has he been successful in removing supporters of the lawsuit from SLFPA-E leadership, but has now prevented levee boards from suing anyone in the future. The new law that cuts out SLFPA-E, SB469, retroactively delegitimizes the levee board lawsuit and only allows certain government agencies from filing suit for coastal issues in the future. Thats right- levee board authorities, which are mainly comprised of lawyers and judges, can no longer undertake legal action to protect the coast line. Instead they are at the whims of state politics and the businesses closest to those in power.

There has been a some grassroots mobilization against the lawsuit-killing legislation. Notably, LTG Russell Honore, a man who came into the public eye when commanding the Joint Task Force for Katrina, has now become a leader in Louisiana environmental issues. He and his group, Green Army, has been a consistent local voice in challenging corporate power in issues ranging from fracking to the Bayou Corne sinkhole. The General has proven to be an effective community organizer, in many ways becoming the default face of Louisiana’s marginalized green movement.

But despite the state’s loyalty to the oil & gas block, there have been critics from within government. SB469 won by a 59-39(6 absent) in the state House and 25-11 (3 absent) in the state Senate. A sizable majority for sure, however, there still shows at least some political opposition to the booming industry. The most notable public official to speak out against the bill is Attorney General Buddy Caldwell. Caldwell is a conservative politician who has shown little interest in climate change or other environmental preservation issues. However, he has rightly pointed out that this law could prevent citizens from making claims from the BP oil spill. AG Caldwell, the seemingly lone public servant on the other side of this issue, has been drawing attention to this plausible scenario. ‘Plausible’ is probably the right word to use in this instance since a blocking citizens from compensation could lead to electoral backlash. Almost all Gulf Coast small businesses and home owners are reliant on the class action suits to receive BP money, having little input in the negotiation process.

The state house restricting levee boards is a highly technical issue which could explain the lack of public concern on this new development. Critics mainly belong Greater New Orleans grassroots advocates, and as mentioned their voices are often muzzled by the powers at be. This issue is surely to arise again as Louisiana continues to a football stadium of coastline every hour despite Jindal’s approach of addressing the issue within the statehouse.

Coastline destruction is an undeniably significant problem, that even the business community is anxious about. But the lack of electoral attention to this issue is particularly depressing for  climate advocates. If states lack the political will to hold oil companies responsible for the  destruction of land – then the prospect of holding said companies accountable for carbon emissions seems to be even more of a pipe dream.

Is the World of Energy that Fragile? : A Lawsuit Against Oil &amp Gas Shines Light on Coastal Erosion

A significant legal battle in Southern Louisiana has led to a discussion on the evolving relationship between the public and the fossil fuel industry. The Southeast Louisiana Flood Protection Authority-East (SLFPA-E), a local authority that monitors levee structures around Greater New Orleans, has filed a lawsuit against the numerous energy companies that drill offshore. SLFPA-E uses compelling data that indicates that the exploration and drilling of fossil fuels has severely damaged the state’s wetlands and coastline. Not only does this have ecological impacts, but a compromised coastline makes residents far more vulnerable to storm surges and flooding. Research conducted by public officials as well as energy industry scientists has definitively outlined that oil & gas companies are responsible for roughly one-third of coastal erosion.

Naturally, the accused companies strongly disagree with the validity of the suit. One Chevron executive referred to the lawsuit as ‘laughable’, and industry spokesmen displayed confidence that the state government would not let the charges remain. Sure enough, Gov. Jindal removed Jon Barry, head of SLFPA-E, roughly 2 weeks after the story broke and has since made moves to ensure that the suit fall flat.

It’s not hard to see how close the oil industry is with Louisiana politics as well as daily life. Just about every New Orleans convention or event is sponsored by Chevron, that includes Super Bowls, Alligator Festivals and King Cake competitions. It’s not only American companies either- Sasol, a South African multinational, has recently committed to investing up to $21 billion in Southwestern Louisiana. The benefits of having energy producers in your backyard are fairly obvious. It has been well-documented how folks with high-school diplomas are making close to six figures working on oil-rigs. However, the SLFPA-E lawsuit proves oil & gas extraction has negative impacts that are too overwhelming to ignore.

Lets be clear, the fossil fuel industry is here to stay in the Gulf. Uprooting oil & gas companies is just about unthinkable in the American South’s political climate. The industry is deeply ingrained within the Gulf economy providing over 50,000 direct jobs. After all, the majority of Louisianans were bitterly against the moratorium on oil exploration and drilling after the Deep Horizon oil spill. Lafourche Parish is known for having some of the lowest unemployment levels in the country, but during the moratorium the vast majority of constituents were left temporarily jobless. So unfortunately for climate change advocates, the debate concerning the future of fossil fuels is considerably narrower in Louisiana. However, this SFLPA-E lawsuit may finally be the politically safe platform that Louisianans have lacked in the past to rethink their intense loyalty to the energy sector- even if only in an incremental manner. While the lawsuit doesn’t bring any new concepts into the fold- oil companies’ ecological damage has been an issue for some time – it does have the benefit of timing.

Coastal America was faced with enormous premium increases after a restructuring of the National Flood Insurance Program. The NFIP being the federal agency that insures homeowners for water damage from storms. After the Hurricanes Katrina, Sandy and Isaac the National Flood Insurance Program fell into $24 billion of debt. Despite recent reforms to the NFIP, Louisiana residents are still at risk of home damage which means that actuaries would increase their NFIP premiums. Being battered by storms has always been part of the Bayou state experience. But the threat of property destruction is exponentially greater when the coastline buffer receding at such a fast rate. In fact, one of the primary reasons private insurers pulled out of the Flood Insurance market was because of coastal erosion. As proven by the aftermath of Katrina, insurance companies would be on the hook for tens of billions of dollars in claims, which would surely negate any revenue generated from monthly premiums.

It is without a doubt Louisianans have a strong financial incentive to support coastal restoration efforts. Even conservative leaders such as Gov. Jindal (who is hardly an environmentalist) uses millions of state dollars to rebuild artificial sand dunes across the inner Gulf. Now the main questions are: how expansive should coastal restoration operations be? And who pays for it? Unfortunately for the Louisiana treasury, state leaders aren’t ready to ask the energy companies to finance costly coastal restoration operations, even though they have proven to cause roughly a third of the damage. The billions of tax dollars collected from oil & gas companies help pay for Jindal’s coastal restoration efforts. But their current contribution barely puts a dent of the coastal destruction they have committed.

Chaland Restoration Proj

The SFLAP-E lawsuit, while sure to fail, could potentially get Louisianans to demand at least some compensation for coastline damage outside of the tax dollars generated from their day-to-day operations. Obviously there will always be strong opposition to any move that demands additional accountability from oil companies- but the argument that these corporations will leave the Gulf if compensation is requested should be viewed with intense skepticism. Conservatives will always insist that taxes and regulation scare away business….And in an increasingly global marketplace, this argument has validity. But when it comes to extracting fossil fuels, don’t governments have considerably more leverage?

To give an extreme example, when Hugo Chavez created ‘one of the most aggressive tax systems’, by increasing oil royalties from 1% to 16.6%, oil multinationals became incensed. Yet American multinationals continue operations in Venezuela to this day despite their cries of unfairness. No one in the US is asking for the level of compensation that Chavez demanded… yet the same sound bytes are used: ‘They don’t have to be here’. ‘They’ll go to China.’ ‘They’ll go somewhere more business-friendly’. Energy spokes people have continuously said, ‘Our shale is no different than elsewhere’. The concept of corporate-flight is a concern that routinely enters the debate whenever increased taxes or regulation is proposed, usually by those connected to the industry in question. The US and especially the Gulf have an enormous amount of shale formation along with a trained workforce. Plus unlike several countries that are major sources of energy, the US can guarantee a level of stability and safety for their workers.

The truth is, it is fairly rare for a oil & gas corporation to cancel a drilling operations because of increased taxes- Which is arguably what the SFLAP-E lawsuit demands from oil companies to help restore Louisiana coastline. Exxon Mobil has been aggressively extracting oil in Angola where they are taxed at a rate of 75%. Of course, they only actually pay a tax rate around 35% after the US government reimburses the difference. The massive tax breaks given to US oil companies has been a contemptuous issue for the American left for decades now and has even gained some steam in the Tea Party movement as well. These beginnings of bipartisan support are easy to understand when you recognize that American taxpayers are subsidizing the choice of Exxon Mobil to work within an unforgiving business climate. This corporate favoritism should be seen as even more egregious considering that it has proven to be borderline political suicide to hold fossil fuel companies accountable for coastline destruction back in the US.

Ultimately, the fossil fuel industry appears to be willing to put up with a lot of hassles when the payout is worth it. The risk-reward concept is hardly a groundbreaking economics, but is worth noting when you consider the vast resources the Gulf has in the form of shale gas. The Gulf stands in contrast to Kansas where Shell pulled out all operations in 2011 because of a unsatisfactory payout. Kansas played by the rules of the energy industry by hosting an almost nonexistent regulatory environment for horizontal fracking and some of the lowest tax rates in the country. Yet Shell decided that their shale deposits weren’t worth it even after buying 600,000 acres of land. Which brings me back to my main point: when you have the goods, the energy companies come to you. So shouldn’t we expect our government to maximize their leverage?

Unfortunately, for people in Louisiana who face sky high Flood Insurance premiums and an unusually high level of poverty- Republican leadership isn’t even close to interested in asking a little bit more from these oil titans. GOP leadership has recently begun testing the line that the role of government is to facilitate a business friendly environment. But even conservative voters should realize that government should facilitate a strong business climate while getting as much as possible for their constituents. Doesn’t the Shell-Kansas story indicate that it doesn’t matter how comfortable you make oil companies? These folks will set up camp in war-torn, tax gouging, corrupt capitols like Angola.

The broader issue of climate change is not a part of this coastal erosion discussion. Unfortunately, asking oil companies to curb emissions isn’t in the sphere of debate in Southern Louisiana politics. What is a manageable first-step is getting the oil & gas dependent states to start holding these energy corporations accountable for their most basic environmental degradation. Even though the SFLPA-E lawsuit has proven to be a non-starter, it provides a great opportunity for this first-step.