Upheaval From Pandemic and Recession Driving Increase in Wage Theft, According to New Study

November 12, 2020

It has been said that in every crisis lies opportunity. Unfortunately, the twin crises of the COVID-19 pandemic and the recession that followed have increased opportunities for unscrupulous employers to engage in rampant wage theft, including minimum wage and overtime violations. A recent study found that large numbers of low-wage and minimum wage workers, already vulnerable from economic upheaval and uncertainty, are likely being paid less than the law requires, or not receiving paychecks at all.

Increased Unemployment Leads to Increase in Minimum Wage Violations

Released in early September by the Washington Center for Equitable Growth think-tank, the study looked at minimum wage violations during the Great Recession of 2008. The researchers found an undeniable connection between unemployment levels and the rate of wage theft.

Specifically, data revealed that each percentage point increase in a state’s unemployment rate led to an equivalent increase in the probability that a worker would be the victim of a minimum wage violation. Based on these figures, the researchers concluded that more than 20 percent of American low-wage workers were shorted on their paychecks when unemployment spiked in April 2020 after COVID-19 essentially shut down whole sectors of the economy. Given that both the pandemic and recession are ongoing, so is rampant wage theft.

The study also found that:

  • The probability that a low-wage worker would receive less than the minimum wage ranged from about 10 to 22 percent, depending on the state’s unemployment rate.
  • On average, workers lost 20 percent of their hourly wages.
  • Latinx workers were 84 percent more likely, and Black workers were 41 percent more likely than white workers to be victims of minimum wage violations.
  • Women were 43 percent more likely than men to experience wage theft.

Some Factors That Lead to Wage Theft Make It Harder for Workers to Fight Back

A combination of factors contributes to the current epidemic of wage theft, the researchers said. These include:

  • Employers trying to save money and cut corners wherever they can, whether legally or not.
  • A lack of regulators to enforce wage and hours laws, along with an administration determined to weaken worker protections, including those involving minimum wage violations.
  • A tight labor market that decreases the likelihood that a worker will quit over, or complain about, wage and hours violations.

Wage Theft Predates the Pandemic

Although unemployment in the ongoing wake of the coronavirus outbreak has precipitated more incidents of wage theft(sub. req’d), companies regularly cheat workers out of pay in good economic times as well. Employers can shirk their legal wage and hours obligations in various ways, from misclassifying workers as independent contractors instead of employees, to taking unlawful paycheck deductions, to failing to pay required overtime wages.

While tough economic times increase the opportunities and incentives for employers to engage in wage theft, a 2019 Huffington Post report on wage theft found that:

  • Seventeen percent of low-income workers earned less than the minimum wage due to wage theft, according to a 2017 Economic Policy Institute study.
  • A 2009 survey taken in New York, Los Angeles, and Chicago found three-quarters of low-wage workers did not receive the overtime pay they earned.
  • Workers recovered $933 million in wage theft court settlements in 2012.

Outten & Golden: Protecting the Rights of Workers

At Outten & Golden, we fight to ensure workers receive all the compensation they have earned. Our wage and overtime lawyers represent workers whose employers engage in wage theft and have violated federal or local laws governing minimum wage, overtime, misclassification, exemptions, tips, commissions, prevailing wages, and other kinds of compensation. We frequently represent groups of workers who have suffered the same type of wage theft by the same employer in class or collective actions.

If you have questions or concerns about wage theft or believe that your employer may be cheating you out of wages, please contact us today.

(*Prior results do not guarantee a similar outcome.)