“Say it ain’t so, Joe” was the headline on a Chicago Daily News story about baseball player “Shoeless” Joe Jackson and the accusations of fixing the World Series. Jackson was such a beloved sports figure that no one wanted to believe that he was involved in the payoff scheme — with good reason, since he probably wasn’t. (If he were trying to throw the games he certainly made a colossal botch of it by his setting records for his hitting, making no errors in left field, and throwing out a Cincinnati runner at home plate.)
Over the years, the headline entered our language as a way to express our feelings when we hear or read something that deeply disappoints us. And, “Say it isn’t so” would be the normal first reaction to seeing a new report on wages stolen from U.S. workers.
The Economic Policy Institute says that stealing workers’ wages has become a multi-billion-dollar exploitation racket. Based on reports from its researchers who analyzed class action suits as well as federal and state governments’ recoveries of wages from employers, the EPI estimates that “… the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year.”
It’s not a pretty picture. And it certainly doesn’t sound like something we wanted to hear about American employers. Are these the same people we are counting on to hire more people as tax reductions stimulate our economic growth?
Fortunately, probably not. The sad truth is that most of the workers victimized by this racket are already low-wage employees. They tend to be unskilled, less educated and certainly not well positioned to challenge employers’ payroll actions.
The employers who engage in wage theft by not paying overtime when legally obligated to do so, by playing less than minimum wage, by demanding “off the clock” work, by classifying employees as independent contractors, and other forms of cheating.
These employers are not only stealing from their workers, they are stealing from us, too. By illegally pushing down already low wages, they move full-time workers below the poverty line and the federal and state governments make up the difference through various safety net and welfare systems. The taxpayers end up having their pockets picked by these unscrupulous employers.
In some very important ways, though, the damage done by these employers goes beyond the dollar amount of their racket. It casts a shadow on our entire free market system and everyone in it.
Free markets are dependent on surprisingly high levels of honesty and trust. And in the broader sense, an economy based on free markets is equally dependent on those same qualities. The markets themselves can exact a price for any participant who violates that trust. And where self-regulation is inadequate for one reason or another, it is up to government regulators to step in.
That is exactly where we are now. For a variety of reasons, market self-discipline has not been an effective force in discouraging wage theft. In that situation, then, it is up to government regulators to ensure that those qualities survive and thrive in a world that often seems to have an abundance of sleazy operators and cheats.
Whether it is government regulators or market self-discipline that exposes a lapse, violators of trust quickly find out that it is a lot easier to lose one’s reputation than it is to restore it. Some of our largest corporations are still working on restoration projects and they are finding it both expensive and time consuming. Certainly Volkswagen, Wells Fargo, and several Japanese steel exporters have found out just how important trust is in their businesses and are spending a lot of time and money to restore their reputations.
The Economic Policy Institute is a labor advocate and not a totally unbiased analyst – if such an animal exists. And some of the dimensions of the wage theft problem would look a lot sturdier if confirmed by other researchers.
Still, their research clearly indicates that wage theft is a serious problem in our economy. And while federal and state authorities are recovering millions of dollars in stolen wages, recovery is an inherently slow and inefficient process.
What is needed is sufficient knowledge of the problem’s dimensions and to support legislative reform — with the goal of discouraging employers from engaging in wage theft. Some of the data problems in the EPI report might be mitigated if Congress were to investigate the problem and gain better access to federal tax data and to the views and opinions of experienced regulators.
In fact, the goal of legislative reform of wage theft laws should be more than just discouraging wage thieves. It should be this: when someone asks, “Say it isn’t so,” it isn’t.
James McCusker is a Bothell economist, educator and consultant.