Quick Hit Ellyn Fortino Monday September 15th, 2014, 4:16pm

Report: Wage Theft Costs U.S. Workers Billions Of Dollars Annually (UPDATED)

The "widespread" problem of wage theft in America might be costing U.S. workers more than $50 billion annually, according to a new report by the Economic Policy Institute (EPI).

EPI researchers came to the $50 billion estimate based on the findings of a separate, 2008 survey of front-line workers in low-wage industries in Chicago, Los Angeles and New York City. In the three major cities, workers in low-wage industries experienced close to $3 billion in total annual wage theft, which includes paying employees less than the minimum wage and failing to pay for overtime.

"Survey evidence suggests that wage theft is widespread and costs workers billions of dollars a year, a transfer from low-income employees to business owners that worsens income inequality, hurts workers and their families, and damages the sense of fairness and justice that a democracy needs to survive," the EPI report states. "If these findings in New York, Chicago, and Los Angeles are generalizable to the rest of the U.S. low-wage workforce of 30 million, wage theft is costing workers more than $50 billion a year."

Additionally, the EPI report showed that victims of wage theft who sought help from private lawyers or government agencies recovered at least $933 million in stolen pay just in 2012 alone. Most wage-theft victims, however, "never sue and never complain to the government," meaning the $933 million recovered in 2012 "is only the tip of the wage-theft iceberg," the report reads.

The recovered wages in 2012 is also significantly greater than the nearly $341 million stolen in robberies in the country during the same year, the EPI researchers found.

“Wage theft affects far more people than more well-known crimes such as bank robberies, convenience store robberies, street and highway robberies, and gas station robberies combined, and can be absolutely devastating for workers living from paycheck to paycheck,” EPI Vice President Ross Eisenbrey, the report's co-author, said in a statement. “For low-wage workers, the wages lost from wage theft can total nearly 10 percent of their annual earnings.”

Several 2012 wage-theft cases from across the country are cited in the report, including one based on an investigation by Illinois Attorney General Lisa Madigan’s office.

In March of 2012, Mark Zwirecki, a subcontractor for the Melrose Park construction company Classic Gutter Co., pleaded guilty to 10 counts of forgery for carrying out a wage-theft scheme against 10 Polish carpenters under his supervision who were soundproofing homes near O’Hare Airport. Zwirecki paid the carpenters less than the legally-required prevailing wage of $57.51 an hour and socked away nearly $270,753 for himself, according to the attorney general's office.

A Cook County Circuit Court judge sentenced Zwirecki to 12 months probation. He was also required to pay $60,804 in restitution to the workers and a $10,333 fine.

Wage theft has also been seen locally in the fast food and car wash industries, among other examples. And in Cook County alone, approximately $7.3 million in employee wages are stolen each week, according to a 2010 report by the University of Illinois-Chicago's Center for Urban Economic Development.

Jorge Mujica, strategic campaigns organizer with the labor-rights group Arise Chicago, said low-wage workers are not the only ones impacted by wage theft. He said Arise Chicago has heard from teachers, restaurant managers and other workers with "professional titles" who have had their wages stolen.

"It is not only [affecting] your typical McDonald's worker" earning the state's $8.25 minimum hourly wage, Mujica said. "It's people earning $10, $15, $20 an hour, and their wages are being stolen."

Local lawmakers have taken action in recent years to protect workers from stolen wages.

In July of 2010, Illinois Gov. Pat Quinn signed legislation, SB 3568, strengthening the state's ability to fight wage theft.

The city of Chicago has also moved on the issue.

Employers in Chicago could have their business licenses revoked if found guilty of wage theft under a groundbreaking wage-theft prevention ordinance passed by the city council in January of last year.

Mujica said the Chicago ordinance has thus far worked to curb wage theft in the city.

"Ever since it passed, we have not used it once," he said, referring to the possible revocation of a business license as punishment for wage theft. "We always insisted this is not about closing or shutting down businesses. This is about a deterrent, to convince employers that they have to pay. So every time we have invoked the ordinance, it's to enforce an employer to pay. And all of them have paid."

The EPI authors, meanwhile, recommend several steps federal lawmakers can take to address wage theft across the country. 

The experts called on Congress to green light President Barack Obama’s request to increase the number of investigators with the U.S. Department of Labor’s Wage and Hour Division by 300 staffers.

"Ultimately, the current staff of 1,100 investigators should be doubled, along with the associated staff in the office of the Solicitor of Labor, which prosecutes the division’s cases," the report adds.

Among other recommendations, federal penalties for wage and overtime violations need to be increased to "make it economically unwise to violate the law."

"The maximum civil monetary penalty for failure to pay the minimum wage or the required overtime premium is $1,100," the report reads. "For giant corporations such as Wal-Mart and Dollar General, maximum civil money penalties per violation should probably be at least $25,000, while small businesses should be subject to smaller fines—perhaps $5,000 per violation"

Additionally, the authors want Congress to approve pending amendments to appropriation bills that would bar firms convicted of wage and hour violations from receiving federal contracts.

Mujica said policies should also be enacted to make it easier for the U.S. Department of Labor to collect stolen wages from employers who violate the law.

"We really have to make it tough for employers, and really convince them that they have to pay," he said. "Theft is theft. That's it."

UPDATE (4:34 p.m.): Maria Myotte, national communications coordinator for Restaurant Opportunities Centers United (ROC United), issued the following statement to Progress Illinois in response to the EPI's wage-theft report:

EPI's research confirms what ROC known and has been hearing from restaurant workers for years. The pervasiveness of wage theft is another reason that ROC is advocating for the restaurant industry to be held accountable to paying all its workers the regular minimum wage through our One Fair Wage campaign. Tipped workers, overwhelmingly women, are especially hard hit by wage theft; the sub-minimum wage creates a problematic two-tiered wage system that is heavily exploited by unscrupulous managers and employers. Although employers are required to 'top off' their tipped employees when tips don't add up to the regular minimum wage, due to lax enforcement, many employers simply don't, and as many restaurant workers have told us, some employers go as far as directly telling their workers that they 'better make enough in tips' because they're going to report that they did regardless. 

It's simply not acceptable for any industry, let alone one of the largest and fastest growing sectors of our economy, to get away with not directly paying a significant portion of its workforce,and to instead force customers to provide the majority, and often, entirety of their take-home pay.

Image: Deivid Rojas/Fight for 15


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