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Wage theft increases during recessions

by | Oct 20, 2020 | Wage And Hour/Overtime

A newly released study shows wage theft by employers grows significantly during troubled economic times, mirroring a rise in unemployment numbers. Women, people of color and noncitizens are the most likely targets.

According to a paper released by the Washington Center for Equitable Growth, low-wage workers victimized by unscrupulous employers lose, on average, about one-fifth of their hourly pay. Minimum wage workers are the hardest hit.

Key takeaways

The study, performed by the Center for Innovation in Worker Organization at Rutgers University, focused on the Great Recession from 2007 to 2009. Researchers say the results are relevant to the current economic crisis caused by the coronavirus pandemic. Findings include:

  • Workers were paid an average of 10% to 22% below the minimum wage
  • Those violations resulted in an average loss of $1.46 per hour
  • For each percentage point increase in unemployment, wage violations rose at nearly the same rate

Routinely targeted worker groups identified

Workers in specific industries, such as construction, retail stores and restaurants are often undercompensated during booming economic times. But, during downturns, researchers identified these disturbing statistics:

  • Noncitizens are more than twice as likely to experience wage violations than citizens
  • 84% of Latinx workers suffer losses compared to white employees
  • Black workers and women were almost 50% more likely to experience minimum wage violations than white workers and men
  • Noncitizen Latinx women were 400% more likely to have their rights violated than white males

Fear and a lack of enforcement

A spike in wage violations results from two primary reasons during a recession. First, jobs are in short supply, and workers are unlikely to take employers to task for fear of losing their jobs. Second, cities and states cut budgets, resulting in fewer resources devoted to enforcing labor laws.

Worker advocacy groups say unethical employers take advantage of vulnerable employees, knowing they are unlikely to fight back. In some cases, even employers who have obeyed wage and hour laws look to take advantage to increase their bottom lines.

How to take action

Employers steal wages from workers in several ways, including failing to pay overtime, ordering or expecting employees to work off the clock, not paying tips or denying guaranteed meal or rest breaks.

When these violations occur, contacting an experienced and aggressive employment attorney who will investigate your case can help you recover the compensation you have earned.

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The Attorneys of Katz Melinger PLLC