Wage violations may lead to "trickle-up" economy stagnation

Next week, if someone were to rob you of $51, you'd probably call the police. Now imagine that it happens every week. Or let's say that you're driving and someone broadsides you, but pressures you into not going to the hospital for your injuries.

Sound outlandish? Seem a bit predatory? Sound like something that could never happen here? Well, these scenarios are reality for approximately two-thirds of the low-wage workers in the United States, according to a recent study. The New York Times has reported that the study, which analyzed wage violations in low-wage industries, found that the typical low-wage worker lost the aforementioned $51 per week due to wage violations. That's a hefty chunk taken out of an average paycheck of $339.

See the story here: http://www.nytimes.com/2009/09/02/us/02wage.html?_r=3&partner=rss&emc=rss

It gets worse for those toiling in, among other industries, apparel manufacturing, child care and retail. In what is certain to be a controversial finding, the study suggests that employers have enjoyed astounding success in pressuring their low-wage workers not to file workers' comp claims. A breathtakingly low eight percent of these workers file for compensation when they suffer serious injuries on the job.

It gets worse still. 57% of the participants did not receive mandatory pay documents that would ensure legal and accurate compensation. 12% of workers who received tips stated that their employer stole their tips. And of the workers who filed wage complaints, 43% said that they experienced some form of illegal retaliation as a result.

And these violations are not, according to the study, limited to a few bad actors, nor do the violations disproportionately affect undocumented workers, those least likely to assert their rights. Instead, the study shows that the disregard for federal labor standards is widespread throughout the low-wage labor market and affects in almost equal parts, undocumented workers (39%), legal immigrants (31%) and native-born citizens (30%.)

We can expect more workers to be affected by such violations. According to recent reports, the underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- reached a record 16.8 percent. That's more and more workers who are forced to take low-wage, part-time employment.

And that, indirectly, affects us all. An already-struggling economy isn't receiving the assistance it could from these workers who have less money to spend as a result of these violations. And the federal government, which needs the money for little things like health care reform, paying down the deficit and financing two wars, isn't getting all the tax revenues that it can.

So, what is to be done? Obviously hiring more investigators is a good first step. Immigration reform might assist as well, as it would theoretically offer a reason for undocumented workers to come out of the shadows, thereby diminishing the power employers have over those workers. And some version of labor reform is essential to give employees a stronger voice. But, as previously noted, this might not happen.

As any casual observer of labor reform efforts knows, its opponents have been far more effective at spreading their message than have its proponents. And that's fine. One of the hallmarks of our modern American democracy is that the group that messages the best gets to light the cigars. But a recent comment by Senate Majority Leader Mitch McConnell (R-KY) highlights a general belief that may doom labor reform. The Bluegrass State Republican explained why none in his caucus will vote for the Employee Free Choice Act, no matter what form it takes, should the day come when it reaches the Senate floor. Workers, you see, don't want to join unions because of the "very enlightened management in this country now, treating employees better."

If McConnell's statement is taken at face value, it suggests that many simply don't believe that egregious wage violations and unfair labor practices still occur. The participants in this survey would beg to differ. Perhaps because of the industries in which they work and the pay they receive, their voices just don't get heard as often as they should. But we disregard their plight at risk to our own economic future.