Is wage theft mostly a US problem?

by Doctor Science

In honor of Labor Day, Steven Greenhouse of the NY Times wrote about how more workers are claiming wage theft:

a flood of recent cases — brought in California and across the nation — that accuse employers of violating minimum wage and overtime laws, erasing work hours and wrongfully taking employees' tips. Worker advocates call these practices "wage theft," insisting it has become far too prevalent.

Business groups of course disagree:

If anything, employers have become more scrupulous in complying with wage laws, the groups say, in response to the much publicized lawsuits about so-called off-the-clock work that were filed against Walmart and other large companies a decade ago.

-- because what happened 10 years ago totally still dominates their sense of what they can get away with, presumably. On the other hand, a search of the business world's "local paper", the Wall Street Journal, reveals only one article about wage theft in the past year -- about McDonald's, giving the impression that wage theft is an issue only for certain low-wage and low-status workers.

Greenhouse's article got more than a thousand comments within a day, many from people describing the wage theft they'd experienced in businesses of all kinds. You can see a similar outpouring in the comments to a NY Times editorial from April about wage theft from white-collar workers. The Times does not hesitate to link wage theft to surging corporate profits and the lack of a political agenda "that regards labor, not corporations, as the center of the economy."

What I wonder is whether widespread wage theft is significantly more of a problem in the US than in the other wealthy nations -- Europe, Canada, Japan, etc. The google-machine suggests that it is -- I can only find a little about wage theft in Canada, less in the other countries. But that may be a question of phrasing, or that wage theft in those countries is strictly limited to immigrants and other stigmatized populations, not breaking out to affect "regular people" who count more with the press and government.

But I just can't help noticing how crucial the most blatant form of wage theft has been in American history. In 1790, more than 18% of the US population had their wages stolen *entirely*. By 1860, it was down to 13% for the country as a whole -- but in both South Carolina and Mississippi the majority of the population were slaves.

I think it's worth asking whether American culture got into the habit of expecting some proportion of workers not to deserve *any* wages, where any money they received was really a gift, something for which they should be grateful. And whether, for instance, this habit or cultural expectation was especially strong for e.g. agricultural field labor, which thus came to seem particularly unworthy of remuneration -- even though it's where the food comes from.

The Third Horseman of the Book of Revelation, as depicted in the Apocalypse Tapestry of Angers, (c. 1380). I found it when I image-googled "a day's wages", because it was linked to a Metallica fan page, quoting Revelation 6:6-5:

When the Lamb opened the third seal, I heard the third living creature say, "Come and see!" I looked, and there before me was a black horse! Its rider was holding a pair of scales in his hand. Then I heard what sounded like a voice among the four living creatures, saying, "A quart of wheat for a day's wages, and three quarts of barley for a day's wages, and do not damage the oil and the wine!"

Though in modern renditions (including Metallica's) the Third Horseman is usually interpreted as "Famine", you'll note that the tapestry doesn't seem to show him that way.

Like the tapestry-maker, I think this figure should be understood as "bearing a cash register", and representing Economic Injustice and inequality. The Revelator's understanding of Famine is closer to Amartya Sen's than many Christians are comfortable with.

Comments

[JakeB]

Although the Clash song does mention wine, at least indirectly.

[wj]

Do you count it as "wage theft" if the employee is on salary . . . and routinely is expected to work 50 or 60 or more hours a week? Which happens lots in IT tech jobs, and also would seem to afflict a lot of managers. Granted, those people get paid rather well. But, on an hourly basis, perhaps not quite so well as the raw salary numbers might suggest.

Just making the point that you have to define the term carefully. Otherwise, whatever conclusions you think you are reaching are going to be suspect.

[Nombrilisme Vide]

I recall reading something probably 10 years ago about the prevalence in certain industries of wrongfully classifying non-trivial numbers of employees as managers IOT engage in precisely the sort of thing you're mentioning, wj. And these "managers" were quite pointedly not getting paid rather well. I'll see if I can scare up that discussion up or (preferably) something more recent but comparable.

[Frank Shannon]

Wow, this is neat. I'm glad I still look at obsidian wings.

[bobbyp]

for wj:

The Top 3 FSLA Violations

[wj]

Bobby, do you happen to have an immediately available link to the reasoning (justification?) that was used to exclude "certain computer professionals"? Just curious.

[Lurker]

To understand the part about "do not touch oil and wine", one should know that these were luxury groceries in Roman world. They commanded high prices and were bery profitable for landowners. However, they are also capital-intensive crops, because establishing a wineyard or a olive grove takes years.

Nonetheless, Roman emperors issued, over the years, innumerable decrees prohibiting the cereal fields from being converted for wine and oil production. Obviously, in vain.

With this knowledge, the quoted passage cannot be honestly interpreted as anything else than a call for social justice.

[Marty]

As far as I can tell, more people are claiming wage theft because the industry that chases class action drug suits has decided that this is the next frontier. In California and Florida they are actively recruiting people in the standard late night commercials.

[Countme-In]

If all workers called the time they put in "billable hours" and industry stopped using terms like "time off the clock" and stopped bilking people of their hard-earned pay (that's what it's called when tax time rolls around), the late night shyster capitalists wouldn't capitalize, as far as I can tell.

[Ugh]

more people are claiming wage theft because the industry that chases class action drug suits has decided that this is the next frontier. In California and Florida they are actively recruiting people in the standard late night commercials.

Sounds like the free market at work!

[bobbyp]

As far as I can tell, more people are claiming wage theft because the industry that chases class action drug suits has decided that this is the next frontier.

Or it could have something to do with stagnating real wages, economic uncertainty, the skewed distribution of economic bargaining power, and the dawning realization on the part of many wage workers that they are getting robbed.

To ascribe this to television commercials is downright silly. But your bought and paid for Supreme Court is doing just about everything it can to make sure class action lawsuits are a thing of the past.

Conservatives, as usual, are trying to tilt the playing field in their favor. So much for the "free market of ideas."

[bobbyp]

Bobby, do you happen to have an immediately available link to the reasoning (justification?) that was used to exclude "certain computer professionals"? Just curious.

Sorry, no. I pick door #2: Industry lobbying.

[Doctor Science]

Ugh is right, Marty. The "free market" solution to wage theft is litigation directed by profit-driven lawyers. The alternatives are government regulation, or unions.

Frankly, my personal preference is for unions, but we still need litigation and government regulation.

Do you, Marty, believe that the kinds of practices outlined in the PDF bobbyp linked are NOT more common than they were 30 years ago? Because I have certainly seen more cases of contractors (and subcontractors) and re-classifying people as managment than there used to be.

The practice of on-call and just-in-time scheduling is also new, and though it's not direct wage theft, it makes it very difficult for workers to have more than one part-time job. It's "full-time commitment, part-time pay", so I think it's also a kind of wage theft -- the employer is stealing (keeping for their profit margin) the money they owe people for that full-time commitment.

The alternative alternative would be full employment as a core government goal -- a more important goal than, e.g., low taxes or zero inflation.

[russell]

Instead of trying to chisel low-wage employees out of their time and money, I'd like to see the large-scale low-wage employers - WalMart, McDonalds, Yum brands, etc. - institute a standard practice of profit sharing.

Take some chunk of the profit - 10%, 20%, pick any number you like - and return it to the employees.

If the company has a good year, the employees have a good year.

Lots of companies do that, and do quite well. The big boys could do it just as easily.

[Slartibartfast]

I don't see wage theft, which doesn't mean it doesn't exist; just that I haven't seen it. Never saw it my entire life prior to age 22 as an hourly worker. The closest thing to having my wages taken without my consent was taxes and union dues, both of which I would just as soon not have to pay.

But not theft. None of which means anything at all for anyone other than me.

What I have seen (heard about, mostly, because my wife does the books for two construction companies) is subcontractors stiffing their subcontractors. Say you're a contractor, and are responsibly paying your subs for time and material (and profit of course) that they're billing you for. Then you find out that your subs have not paid their employees, or their subcontractors, or suppliers.

Bad things can result. Worse, likely, for the people at the other end of the food chain than for the prime. But it's pervasive in the industry. Sometimes people just hang on to the money for overly long, and you have to just keep pestering them mercilessly until they pay, and sometimes they simply pocket the money, fold up shop and set up a differently named business that does the same thing so that they can steal someone else's money.

It's pervasive in Florida. As is fly-by-night roofing and other contractors that prey on the elderly and simply unfortunate folks, convincing them to advance a rather large chunk of the money, sometimes actually making a token start on the project, only to disappear and resurface later under a different name. There used to be a running column in the Sentinel to keep people aware of that sort of thing.

Thieves abound.

[Hartmut]

The practice of declaring a larger part of the employees managers has occurred occasionally over here in Germany but for a different reason. Until quite recently there were strict rules about opening and closing times of shops* and those could be extremly inconvenient for both companies and customers. Later these laws did not rest any longer on specific hours set by law for the shops but on the rules for the people working there (i.e. even willing employees could not work after a set time, 6pm (later extended to 8pm)). But there was a loophole that exempted personnel with the authority of procuration (=managers). Some shops formally promoted some of their salespersons to procurists, so that they could work outside the time limits (without increase in the workload and usually on a volontary basis). Iirc the courts and regulating agencies struggled with that for several years until the law violated in spirit but not letter got taken off the books (iirc forced by EU superior decision). In practice most shops still close at either 6pm or 8pm (and reopen at 9am or 10am). Only a select few extended to 10 pm or midnight (almost all of them over-large grocery stores).
So, this was/is not a conspiracy by the owners to exploit their employees but one between owners, employees and customers to evade some antiquated regulations. The scheme would not have prevailed, if the employees had not been in on it or if the scope had been too large. The laws against excessive overtime were not violated in the prominent cases that the courts dealt with in this matter and the standard bearer for the case was known for his strong social conscience and not under suspicion of being an exploiter of his employees.

In the end it rests on the legal system being independent and not corrupted. Our high courts have earned a strong good reputation in that regard and clearly cherish it.

*exempting petrol stations and newsstands but imposing limits on the range of products those could sell.

[Doctor Science]

Hartmut, are the rules enforced in the same way for Turkish or other immigrant workers?

I'm arguing that the US problem doesn't start with a corrupt legal/judicial system, per se, but with this country's history of having a large (in some states very large) population of workers who were *explicitly* outside legal protections, and that this helped get us into the cultural habit of thinking workers don't necessarily even deserve money for their work.

[Marty]

and that this helped get us into the cultural habit of thinking workers don't necessarily even deserve money for their work.

This is wrong, the promotions question earlier is that I see more people wanting to have a salary, then finding that employers expect them to work what they consider overtime for free. These are the people more likely to complain, not low wage workers or servers or bartenders.

The flip side is to get people to be productive, since salaried people now treat their job like a time clock job.

[Nombrilisme Vide]

Except Marty that's not at all what's being talked about with "the promotions question". The matter at hand is capital reclassifying certain jobs as management when the jobs don't meet the criteria outlined in the law, and capital doing it expressly to circumvent overtime regulations and suchlike. This is not about that damned lazy labor, always trying to steal the very sweat off the honest, hardworking capitalist's brow. This is not about employee takers trying to exploit employer makers and get something for nothing. No matter how hard you try to reframe it, it's about the owners and bosses playing semantic games with job titles IOT circumvent wage and labor laws and squeeze more work for less money out of their workers.

[Marty]

No nv, it is the perception that those nasty bosses are doing it again. Hogwash. In fact you can't have it both ways. A month ago those big bosses were reclassifying thousands of positions to hourly, part-time to avoid paying for insurance, making sure those low wage people didn't get over thirty hours. Now they are all working off the clock overtime. So they don't go over 40.

[Hartmut]

DocScience, for the most part I'd say that is the case at least these days. In those communities the most violations could be expected to come from inside, in particular from inside the family (a male head of household exploiting wife and kids in his own business). This does not mean that there is no discrimination against immigrants (still quite a lot of it*) but imo this does not to a significant extent express itself in systematic wage theft.
Some jobs that immigrants have a large share in (prime example: the Polish or Turkish cleaning woman) are underpaid of course but that seems to be more a problem of these jobs themselves than of the ethnicity of those doing it. Ironically, some of the laws will even get applied more vigorously because the lazy natives fear the willingness of many immigrants to work longer and harder since they are used to it from home where laws are less worker-friendly**.
There are mainly two areas where the state tries but fails to enforce the rules: the sex trade and foreign diplomats. The former due to its connection to organized crime, the latter due to immunity. It's difficult to say who is worse. Especially the diplomats from the (Arabian) Golf States are scofflaws of the highest order (from thousands of traffic violations per year to slaveholding and abuse).

*of course the prejudices are the other way around.
**although even most xenophobes have learned to appreciate the Turkish greengrocers and some originally Turkish delicacies are now marketed as German abroad (most famously the Berlin version of Döner kebab)

[McKinneyTexas]

The FLSA is pretty straightforward and disobeying it is stupid. I find clients doing it all the time, usually out of some degree of ignorance, but the ignorance tends toward chiseling employees. It is really stupid to do this because the FLSA is very worker friendly, very not-employer friendly.

A case in point. I represent an EMS service. Its medics work either 48 or 72 hour shifts each nine week period such that a medic works 6 48 hour shifts and 3 72 hour shifts.

The medics preferred level paychecks for budgeting reasons and so they were paid for 58 hours, 40 straight time and 18 OT each week, which is the average of the OT hours worked over the nine week period. For the 48 hour shifts, the medics got overpaid by ten hours, for the 72 hour shifts the medics got underpaid by 14 hours, but since there are 6 48 hour shifts and 3 72 hour shifts, every hour worked over 40 hours was paid at time and a half. That is, no one got chiseled, underpaid, etc. Also, my client had a letter from the Dept of Labor specifically approving this procedure.

Turns out this is a violation of FLSA. We owed OT for the weeks in which the medics worked 72 hours. What about the other six weeks where the medics got 10 hours of OT they didn't work, I asked? Tough sh*t for the employer, I learned. Because there is a 2 year look back period and because the employer pays attorneys fees as well as back pay, it was a big enough hit that the client had to reorganize under Chapter 11. And the letter from the DOL? Meaningless except that it helped me beat back the enemy lawyers' attempts to get double damages.

[Nombrilisme Vide]

No nv, it is the perception that those nasty bosses are doing it again. Hogwash. In fact you can't have it both ways.

You're so right, Marty. What was I thinking? Utter hogwash. If you hadn't nipped that in the bud, I'd've probably ended up spouting nonsense like there being more than one solitary employer, with one single uniform employment policy, in the whole of the US. Ridiculous! Or that there are different segments of the workforce which are subject to different labor conditions and work schedules/volumes, when we know there's no variance what-so-ever. Completely absurd! We all know that all American laborers work in identical situations with a single employment model, so of course any statement about any management actions must apply to all of them, or none; I feel so ashamed for having tried to get one over on you...

[Marty]

NV, I am confused a little. All of your sarcasm supports my point. I don't know a single employer who intentionally steals money in the way described although I know of many different pay schemes etc. Different models etc. Just as you allude to.

[Nombrilisme Vide]

Marty, let me explain the point of that sarcasm very clearly. When you say I "can't have it both ways", you are directly accusing me of claiming that the employers who were reducing hours and suchlike of employees they did not want to be obliged to provide insurance for, are the same employers who are (and have been for quite some time) overworking and underpaying certain of their employees via assorted manipulations and chicanery. You are saying that I am lumping completely unrelated employers in completely unrelated industries into one solid, seamless mass, and pretending they're all the same. Which is an absurd suggestion on the face of it, and deserving of no more respect than I treated it with.

It's all well and good for you to suddenly discover the value of recognizing that we can talk about different groups of employers and employees at different times, but that was not at all what you were doing when you spoke about how the primary issue with people being made salaried is that they're (occasionally? often? always?) shiftless, lazy, irresponsible, and greedy. It's not what you were doing when you without warning lumped together a conversation from months ago with the present one.

So yeah, no, I can't agree that my sarcasm supports your point, not least because your point has shifted its focus (though not its tone) around rather drastically over your last three comments.

[Marty]

I said nothing about shiftless, lazy, greedy not my words, I said productive. I said treating salaried jobs like time clock jobs, making people productive. Anyone who believes that isn't a bigger challenge today isn't paying attention.

I didn't directly accuse you of anything. You can't have it both ways was really the generic you, my point isn't changed, or my tone. There may be some chicanery or wage theft, I don't think its more than historically, which was my point. Having lawyers trolling for people to sue raises the number of suits. I'm not surprised by this.

[bobbyp]

Then you find out that your subs have not paid their employees, or their subcontractors, or suppliers.

And as the prime who has bonded the project with the Owner, we get the pleasure (at least in the State of Washington) of getting to pay for those services twice!

There's a lot more to construction than getting to play with big toys.

[is(de)]

This time I have to respectfully disagree with Hartmut. It very much depends on how you define wage theft. I believe that in Germany more intense regulations and stronger unions might keep this problem at a lower level. Nevertheless, if given the chance, some employers will use these schemes and gain unfair advantages in competition. One of the most common violations is paying a nominally acceptable hourly wage, but setting the requirements (e.g. rooms cleaned per hour) so high that they are impossible to fulfill and the people have to work (uncompensated) overtime to get it done at all. And yes, since these jobs are often taken by recent immigrants with little German language skills or people with little education, they may not be able to find out about their rights, or be afraid to lose their jobs, or not have the economical or mental stamina to go to the courts. Ten years ago, my mother worked as a chambermaid at a hotel. She was hired directly and not by a subcontractor and was not treated this way, but she saw it time and again when a new subcontractor company was hired to clean the rooms. Also, the subcontractor game is very much alive in construction. The European Singe Market allows companies from all members of the EU to offer wares and services in all other countries. So in Germany, you often see Polish, Czech or Romanian subcontractors doing the hardest and most menial jobs on site - bar benders and so on. Some of those companies are frauds, hiring desperate people in depressed economies of southern and eastern Europe, promising them good wages and stealing their wages - everything from unpaid overtime, horrendous and fraudulent "rents" for substandard accomodations, paying below minimum wages or not paying at all.

[Hartmut]

No problem on my side. I do not claim to be an expert. If you are right then the practices from the sex trade are spreading into construction too. Another of the unexpected negative consequences of the end of the Cold War (the immediate cause of the rising abuses in the sex trade seem to be more the new prostitution laws that still need a lot of work).
That cleaners are treated like dirt is an old problem and it hits ethnic Germans too. Btw, wasn't there recently a very controversial high court decision on that topic?