A report released on May 10, 2017 by the Economic Policy Institute (EPI) assesses the prevalence and magnitude of one form of wage theft—minimum wage violations. Minimum wage violations is defined in the report as paying a worker an effective hourly rate that is below the legal or binding minimum wage, either state or federal law. The report looked at the 10 most populous U.S. states: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas. These states were chosen to limit the focus of the report so EPI could carefully account for each state’s individual minimum wage policies and state-specific exemptions to wage and hour laws. Two of the states chosen, California and New York, actually have anti-wage theft laws on the books. The data for these states provides adequate ample sizes and the total workforce in these states accounts for more than half of the entire U.S. workforce. The results of the study are a bit alarming even if you take into account that the measuring of wage theft is challenging and suitable public data sources are limited. The key findings of the report are that:
- In the 10 most populous states in the country, each year 2.4 million workers covered by state or federal minimum wage laws report being paid less than the applicable minimum wage in their state—approximately 17 percent of the eligible low-wage workforce.
- The total underpayment of wages to these workers amounts to over $8 billion annually. If the findings for these states are representative for the rest of the country, they suggest that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year.
- Workers suffering minimum wage violations are underpaid an average of $64 per week, nearly one-quarter of their weekly earnings. This means that a victim who works year-round is losing, on average, $3,300 per year and receiving only $10,500 in annual wages.
- Young workers, women, people of color, and immigrant workers are more likely than other workers to report being paid less than the minimum wage, but this is primarily because they are also more likely than other workers to be in low-wage jobs. In general, low-wage workers experience minimum wage violations at high rates across demographic categories. In fact, the majority of workers with reported wages below the minimum wage are over 25 and are native-born U.S. citizens, nearly half are white, more than a quarter have children, and just over half work full time.
- In the 10 most populous states, workers are most likely to be paid less than the minimum wage in Florida (7.3 percent), Ohio (5.5 percent), and New York (5.0 percent). However, the severity of underpayment is the worst in Pennsylvania and Texas, where the average victim of a minimum wage violation is cheated out of over 30 percent of earned pay.
- The poverty rate among workers paid less than the minimum wage in these 10 states is over 21 percent—three times the poverty rate for minimum-wage-eligible workers overall. Assuming no change in work hours, if these workers were paid the full wages to which they are entitled, less than 15 percent would be in poverty.
The report gives a full explanation of the background and previous research into the problems.