It’s difficult to imagine anything more basic to a free economy than the right of an employee to be paid for his or her work. Yet this fundamental right is violated in New York’s low-wage industries as a matter of routine. Research from the National Employment Law Project concludes that a fifth of the city’s low-wage workers – an estimated 317,200 working New Yorkers – are paid less than the minimum wage in a given week. Even more are cheated out of the tips they’ve earned, their overtime pay, or the meal breaks they’re legally entitled to. It’s not a case of a few “bad apples” but a well-documented, pervasive pattern of wage theft throughout the city.
In March, I wrote about powerful state legislation drafted and promoted by community organization Make the Road New York to cut the state’s epidemic of wage theft. The Wage Theft Prevention Act stiffens penalties for cheating employees out of wages, encourages workers to come forward, and provides new avenues for investigating and prosecuting wage theft cases – and ensuring violators will pay up.
The bill passed both the state Assembly and Senate in the last legislative session. Yet because each chamber passed a slightly different version of the legislation the bills must be reconciled before the law can be enacted. Legislators will have a small window to act on the bill in the upcoming legislative special session: The Wage Theft Prevention Act sponsored by Senator Diane Savino and Assemblyman Carl Heastie should be a priority.
Clearly low-wage workers and their families are hurt deeply when income they’ve earned is stolen from them. But an environment of pervasive lawlessness at the bottom of our labor market also harms New York’s small businesses, drains revenue from the already depleted city and state budgets, and retards the city’s overall economic recovery.
When enforcement of workplace laws is as lax as it is now and penalties are so low, corrupt employers can simply factor the risk of getting caught into their cost of doing business. As a result, businesses that cheat their employees can come out ahead, leaving responsible, law-abiding business owners at a competitive disadvantage. Small businesses with low margins face the greatest difficulty competing against rivals that are willing to break the law to lower their costs. Enforcing the law would level the playing field for everyone.
Both New York City and New York State face daunting revenue shortfalls that have led to very tight budgets. New York’s epidemic of wage theft makes the situation worse. The state loses an estimated $427.9 million a year in reduced unemployment insurance payments, workers’ compensation premiums, and personal income tax revenue as a byproduct of wage theft. New York City also loses income and sales tax revenue when employees get cheated out of their wages. By improving enforcement of wage and hour laws New York can begin to reclaim a portion of this lost revenue.
There are also broader economic consequences when money is taken from the pockets of New York’s lowest income workers. Workplace violations rob low wage workers of an estimated $3,016 annually out of average wages of just $20,644 a year. New Yorkers living on such low incomes tend to spend their paychecks quickly, buying food, clothing, and other essentials in their communities. By deterring violations, the Wage Theft Prevention Act will keep these wages from being sucked out of our neighborhoods, enabling workers to support their families and put dollars to work rebuilding New York’s economy.
This article was originally posted on DMI Blog.
About the Author: Amy Traub is the Director of Research at the Drum Major Institute. A native of the Cleveland area, Amy is a Phi Beta Kappa graduate of the University of Chicago. Before coming to the Drum Major Institute, Amy headed the research department of a major New York City labor union, where her efforts contributed to the resolution of strikes and successful union organizing campaigns by hundreds of working New Yorkers.