The study estimates that $8b is taken from mostly lower income employees via wage theft.
"What is wage theft?
Wage theft is the failure to pay workers the full wages to which they are legally entitled. Wage theft can take many forms, including but not limited to:
* Minimum wage violations: Paying workers less than the legal minimum wage
* Overtime violations: Failing to pay nonexempt employees time-and-a-half for hours worked in excess of 40 hours per week
* Off-the-clock violations: Asking employees to work off-the-clock before or after their shifts
* Meal break violations: Denying workers their legal meal breaks
* Pay stub and illegal deductions: Taking illegal deductions from wages or not distributing pay stubs
* Tipped minimum wage violations: Confiscating tips from workers or failing to pay tipped workers the difference between their tips and the legal minimum wage
* Employee misclassification violations: Misclassifying employees as independent contractors to pay a wage lower than the legal minimum
For more information about the different forms of wage theft, see Bernhardt et al. (2009) or Gordon et al. (2012)."
Over the course of my working life, I've personally experienced or witnessed all of these except one. They're all pretty common in the US in lower income jobs.
They are still required to pay the difference if wage + tips is less than minimum wage. If an employer violates any part of wage laws, state and federal departments of labor loves to take these cases in my experience.
I believe the $8b figure is actually referring to just wage theft via minimum wage violations, in the 10 states analysed in the study. The totally amount lost to all forms of wage theft across the US is likely much, much higher.
From the article: "In these [10 most populous] states, 2.4 million workers lose $8 billion annually (an average of $3,300 per year for year-round workers) to minimum wage violations."
Well the theory anyway is that nonexempt employees are paid for their time, while exempt employees are paid for doing a job (regardless of whether accomplishing that job takes them 30 or 50 hours a week, or may from time to time unexpectedly take more or less than the "standard" 40 hours).
So if a job takes 24 hours a day to do, every day, and the employee can't physically or psychologically do that then they're not doing their job?
No. I don't buy that. You have to draw the line somewhere, and I thought the war for this line was won long ago in favor of a 40 hour work week. But I guess not all workers have won this right yet.
over the course of only one month at a famous european fast food restaurant during summer, I've experienced :
* Minimum wage violations: Paying workers less than the legal minimum wage
* Overtime violations: Failing to pay nonexempt employees time-and-a-half for hours worked in excess of 40 hours per week
* Off-the-clock violations: Asking employees to work off-the-clock before or after their shifts
* Meal break violations: Denying workers their legal meal breaks
+ in France, if your meal break takes place on your workplace and you can be called back to work during it, it HAS to be paid all the time because it's like an "astreinte" (dunno the word in English), yet they don't pay it and still called us back pretty often.
The employees wanted to sue the restaurant but needed the job...
This is terrible, but it happens to better-paid workers as well. My brother was paid a relatively high hourly salary by a firm who then sent him to work at their client, but they didn't pay him overtime. He complained multiple times to no avail, until he filed a case with the state's labor board...it was a pain and probably difficult for most people to access, but then he finally did get paid everything. The company quickly paid up and asked him to dismiss the case -- so they clearly were "pros" at ripping off their people (they were billing for overtime, just not paying it to my brother who had researched the state laws). There need to be more penalties against larger enterprises especially to discourage abusive behavior...seems to be widespread from this report!
The problem always comes in that the government ends up fumbling everything and will likely screw over small, struggling companies that aren't trying to cheat anyone but just can't make the entire payroll for a few weeks, etc. It is a difficult problem! A transparent database or even marketplace where everyone's wages were clear may be a solution.
What I wish was that an illegal contract clauses be taken as evidence of bad faith on the part of the employer in labor disputes. Means, illegal contract clause -> proof of bad faith -> any labor violation -> 3X damages.
Labor economics aside, that website is one of the best presentations of scholarly work I've ever come across. How can we get this site format to spread to journals / conferences / other think tanks?
Out of interest, what exactly do you like about it? It seems similar to several of the more prominent medical or bioscience journals that I frequently read.
The Public Library of Science is an exclusively online series of journals in biology and medicine. They have a fairly nice layout and design. Perhaps aerospace has something to learn?
There are other ways too, like requiring employees to pay for parking...
Unless you're talking about requiring employees to pay for parking which they're not using, this is not wage theft. To the contrary, the inequity would be if free parking was provided to workers who drove to work but no similar subsidy was provided to those who took public transit. (In Canada, free employee parking is in most cases a taxable benefit.)
>the inequity would be if free parking was provided to workers who drove to work but no similar subsidy was provided to those who took public transit.
Really? Does it work the other way too? My employer will reimburse a small amount of public transit costs, but the people that drive get no similar benefit.
But this can't be possible ! The job market is at full efficiency (meaning the supply of labour is so tight workers can systematically demand more pay and better conditions).
Or so the FED, the BLS, and a few other government departments !
It's actually an open mystery why unemployment is so low, but we have yet to see much upward pressure on wages. Theories I've read (probably in the Economist, definitely at the NYTimes) is there is still hidden slack in the labor market from people who dropped out during the recession, and are gradually rejoining as the economy grows.
The link between supply and demand -- and prices/wages -- is really messy, though. I mean, downward nominal wage rigidity is a big deal (and is well documented). The labor market is nowhere near efficient.
So no, the UI rate is not some fake statistic, cooked up by government agencies... it's just a noisy statistic for a messy market, whose relationship to 'price' (wages) is nonlinear, laggy, etc.
I wouldn't call it noisy. Noisy implies it's inaccuracy tends to be positive and negative. You can have a noisy signal that's not biased. But there's a clear downward bias to the unemployment number.
My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report.
Another factor is to consider inflation. Truly low income will be associated with increased inflation. I would argue going from 1% to 2% is not a sizable increase.
> My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report.
Why are you using a simplistic heuristic that assumes a constant relationship between the headline unemployment figure and other measures when the other measures are measured and published alongside the headline figure? (The measure you seem to prefer, unemployed plus discouraged workers as a share of labor force plus discouraged workers, is published as U4; headline unemployment is U3.)
> For every person counted there's at least one wishing for work but given up enough to not report.
Isn't that essentially what U6 tries to measure? It indeed tends to be fairly close to double the headline U3 unemployment rate most of the time. It is highly correlated to U3, though, so as long as you are looking at U3 in terms of changes instead of in terms of the absolute number, U6 doesn't add much to the picture.
The same phenomenon exists in the UK. That is, an apparent disconnect between wages, GDP growth and employment, resulting in lower productivity metrics for the economy as a whole.
A harsh competitive environment forces commercial entities to develop ever more effective means of extracting value from their workforce, while labor fails to adapt in response because its corresponding entities (chiefly labor unions) are not subject to the same harsh competitive pressures.
Eventually you have an accumulation of durable local wage minimums which in the aggregate appear as a global decrease.
How much would the low earners win or lose if the minimum wage laws would be strongly enforced? My estimate is that they'd lose close to 100%.
Who would hire somebody for 15$/h if the worker is able to only produce 9$/h?
If the law is the only factor to decide the minimum wage, why not setting it to 50$/h, or even 100$/h? Are the politicians and the policy makers really so evil that they like seing workers people struggle at 10-15$/h?
Rather than rebut this in detail, let me just suggest that you study economics before spouting off. It's fun to speculate about numbers, but there is real research and real models to describe these dynamics.
I'm not an economist... but at least I know that about myself.
Rather than attacking random people on the internet insinuating that they're economical illiterates, you yourself admitting to not being an economist, please try and rebut this in detail.
I'm glad you "guess" it's nearly 100%. This article (the top Google hit for "effects of minimum wage on employment") suggests it's in the realm of 10% (though it's probably smaller) based on simple linear models of price elasticity. A 10% drop in employment is not nothing! It could absolutely matter! But that's the foundation for a debate, not some made- up numbers.
My main point is that it's foolish to 'guess' and start applying numbers... it's tempting to make a point that's grounded in political philosophy, and slap a coat of speculative, pseudo-quantitative paint on it so it sounds more considered.
To your other point, about not wasting time on internet comments, I will respectfully concede.
As we're all comfortable with numbers plucked out of the ether, let's use yours:
1. The group of low-wage workers produce on average $9/hr.
2. A minimum wage of $15/hr is introduced.
3. The income of 10% of the group falls to $0/hr because they lose their jobs, a fall of $9/hr * 0.1 = $0.9/hr on average.
4. The income of 90% of the group rises to the new minimum wage of $15/hr, an increase of $(15 - 9 = 6)/hr * 0.9 = $5.4/hr on average.
5. The net change in income is $(5.4 - 0.9 = 4.5)/hr on average.
So with all these contrived numbers the introduction of the minimum wage raised low-wage worker pay by $4.5/hr on average. Is that bad for low-wage workers?
Of course, really, we should just take ryandamm's advice here [0] and stop trying to provide our arguments with the air of rigour by throwing some made up numbers around.
> Who would hire somebody for 15$/h if the worker is able to only produce 9$/h?
There are very, very few places where the minimum wage is $15/hr. As of 2016 the federal government requires a minimum wage of at least $7.25 with only 29 states having an amount above that [1]
Yeah, but the principle is the same: what happens when the worker is not able to produce to the level of the minimum wage? be than 15$/h, or 7.25$/h.
Would you pay somebody 7.25$/h if they're able to only produce 5$/h?
If the state provides benefits they have to put a floor on wages in to avoid subsidizing scumbags. People will work for less than it takes to live if the government pays the difference.
Honestly if you can't make more than 15 dollars off one hour of someone's labor you might need to go out of business.
Given how little 15 is anymore almost anyones labor is worth 15.
Well if we raise the federal minimum that wont be true will it. I mean that a business ought to be able to turn an average persons labour into significantly more than $15 even if they just use them to prepare non gourmet food.
The dynamics are considerably more complicated when you consider massive public policy decisions that affect the labor market, like changing the minimum wage. When you're pricing widgets, you can look at marginal value add and have it make sense. When you're talking about the floor of the labor market, you're really talking about economy-wide effects. The main knock-on effect of raising the minimum wage should be inflation; most labor costs (at least those that get built into consumer prices) are in some way linked to the minimum wage (either explicitly, or because of implicit pay scales).
So yeah, there are considerations. But it's not that kind of mechanical, subtract-marginal-value-of-employee kind of considerations. Unfortunately, economies are big and complex and require sophisticated models (they can be simple -- but they should be sophisticated).
"What is wage theft?
Wage theft is the failure to pay workers the full wages to which they are legally entitled. Wage theft can take many forms, including but not limited to:
* Minimum wage violations: Paying workers less than the legal minimum wage
* Overtime violations: Failing to pay nonexempt employees time-and-a-half for hours worked in excess of 40 hours per week
* Off-the-clock violations: Asking employees to work off-the-clock before or after their shifts
* Meal break violations: Denying workers their legal meal breaks
* Pay stub and illegal deductions: Taking illegal deductions from wages or not distributing pay stubs
* Tipped minimum wage violations: Confiscating tips from workers or failing to pay tipped workers the difference between their tips and the legal minimum wage
* Employee misclassification violations: Misclassifying employees as independent contractors to pay a wage lower than the legal minimum
For more information about the different forms of wage theft, see Bernhardt et al. (2009) or Gordon et al. (2012)."
Over the course of my working life, I've personally experienced or witnessed all of these except one. They're all pretty common in the US in lower income jobs.