Low Wage Industries

Barkan Meizlish , May 14, 2015

Wage theft has become a routine issue over the past few years, particularly in the construction, garment manufacturing, restaurants, and home health care industries.  In 2012, the Department of Labor’s investigations reported wage and hour violations in 71% of restaurants and 93% of garment firms.  While wage theft affects the typical victims—workers in low wage industries—state and federal treasuries also lose billions of tax dollars as a result.

Employers use a variety of illegal pay tactics to avoid paying what they owe.  Some construction firms, for example, deny workers FLSA protection by declaring them to be part-owners.  The outsourcing of hiring to staffing agencies has also promoted wage abuse.  Another tactic drawing increased attention is misclassifying workers as independent contractors.  According to a report by the Treasury Department’s inspector general, the misclassification of workers saves employers $3,170 each year in federal taxes for every employee making average wage ($43,007).

Despite the $1.1 billion in back wages recovered by the Wage and Hour Division over the past five years, many factors play a part in the struggle against wage theft.  With a current total of 1,032 investigators for 7.3 million business establishments, many employers get away with violating the wage and hour provisions.  For example, fast food restaurants have a 1 in 12,000 chance of being investigated.  Because of the limited enforcement staffs, many employers take the risk that they won’t be investigated.  Another challenge to wage enforcement is that employees often cannot collect on judgments or back wage settlements.  Some employers go out of business or disappear to avoid paying employees the required wages.

Source:  Fowler, Levin, & Silverstein, Pay Violations Rampant in Low-Wage Industries Despite Enforcement Efforts, INVESTIGATEWEST, (August 27, 2014) http://www.invw.org/article/pay-violations-rampant-in-1468
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