Thank you to my dissertation committee—professors Jennifer Shinall, Paige Skiba, Matthew Shaw, and Jeffrey Hirsch—who provided invaluable advice and shaped me into a better researcher. Thanks to Zach Sturman for being there for me through every up and down of these six years.
CRIMINALIZING WAGE THEFT
I NTRODUCTION
This paper fills the gap in this debate with an empirical analysis of the most severe wage theft criminalization laws to date. An event study analysis of Minnesota's wage theft criminalization law shows the immediate impact on minimum wage violations.
W AGE T HEFT O VERVIEW
Ashenfelter and Smith (1979) wrote a seminal paper on wage theft theory and formalized the expected costs and benefits of minimum wage noncompliance. The Ministry of Labor (2014) defines low wage workers as those who earn below 150% of their minimum wage.
S TATUTES C RIMINALIZING W AGE T HEFT
State regulation, enforcement, and prosecution play a much larger role, even if criminal penalties are already on the books through federal law.
Minnesota
The state gave further authority to investigate criminal wage theft to the state's Commerce Fraud Bureau in mid-2022 (Nesterak 2022).
Colorado
2,000.10 In addition to more prosecutions of smaller and more common amounts of wage theft, the ordinance established a wage theft unit within the City Attorney's office and removed another employer's defense of promising future wage payments (Metzger 2021). Thus, because the city has higher local minimum wages starting in 2020 and has different enforcement options and strategies than the state, my analysis considers both the inclusion and exclusion of Colorado CPS-ORG respondents who live in a central city metropolitan area. 11.
California
AB 1003 specifically targeted wage theft by authorizing wages, gratuities, benefits and other compensation of either employees or independent contractors to be the subject of the grand theft prosecutions. Finally, unlike the other wage theft criminalization laws, AB 1003 authorizes the aggregation of wages across multiple workers when determining the wages stolen.
Enforcement
- D ATA , S AMPLE S ELECTION , AND M ETHODOLOGY
- R ESULTS
In the baseline model, Minnesota's wage theft criminalization law is associated with a 2.8 percentage point decline in minimum wage violations in the state. Also for these larger minimum wage violations, the treatment effect of the law is significant at the 1% level.
Event Study
When food service workers are excluded, the magnitude of the treatment effect decreases, but the effect remains statistically significant at the 1% level. As in Panel A, the effect of the law in Panel B shows that there are no pre-trends before the enactment of the Colorado law.
Wages
First, I assume that the wage gains that workers should have received due to minimum wage violations fell by 50% as a result of the law. A second method to estimate the wage profit is based on the hourly wage profit from Table 10.
Synthetic Control Analysis
- D ISCUSSION
Minnesota law has significantly increased penalties for wage theft and funding for wage theft investigators and enforcers. It's possible that employers who don't engage in human trafficking but still flout Colorado's minimum wage weren't as aware of the new penalties for wage theft. Minnesota Public Radio News, https://www.mprnews.org/story minnesota-ramps-up-enforcement-of-new-wage-theft-law.
PUBLIC PERCEPTIONS OF WAGE AND HOUR RIGHTS
P RIOR R ESEARCH
One previous, non-experimental survey asked workers about wage and hour rights, with three questions about substantive legal knowledge (Alexander & Prasad 2014).23 These questions were asked as part of the Unregulated Work Survey (Bernhardt et al. 2009). A follow-up article using data from this survey aggregates these questions to report that 41% of respondents “had accurate substantive legal knowledge in the area of wage and hour law” (Alexander & Prasad 2014). With only one sample from 2008 of low-wage workers in three cities surveyed about their personal experiences, much more research is needed to accurately understand public perceptions of wage and hour rights.
S URVEY M ETHODOLOGY
For percent living in a city: https://www.census.gov/programs-surveys/geography/guidance/geo-areas/urban-rural/ua-facts.html. For percentage of hourly workers: https://www.bls.gov/opub/reports/minimum-wage/2021/home.htm. Almost all of the sample reported working for pay or profit, and these workers reported earning overtime, tips, or commissions at higher rates than workers in the US.
Overtime Pay Questions
29 Of course, the manager's job title does not meet the legal requirement to pay overtime pay when the employee fails the primary duty test. This level of duty would not pass the primary duty test because it has no hiring and firing records and does not manage the enterprise. The exact answer to whether Sarah is legally entitled to overtime pay depends on the change.
Minimum Wage Questions
I present the scenario and the first question, whether the worker has the right to a lower minimum wage. If the answer to both questions is yes, the worker in this scenario is legally entitled to both minimum wage and overtime pay. The survey results section compares respondents in these states with respondents in states where state minimum wages still apply.
Compensable Time Questions
The fourth option, where the employee has a base wage of $2.50 per hour and earns $20 in tips per hour, is not legally entitled to a higher base wage under federal law. Many states have increased their minimum wage, so the employee in this variation would also demand a higher base wage under the state wage and hour law. The employee in this question was paid hourly and answered phone calls once a week during his lunch break.
Employee Classification Questions
- S URVEY R ESULTS
For tax and employment purposes, it is correct for Big Box Warehouse to classify Robert as an employee or as an independent contractor of the company. For tax and employment purposes, it is correct for the owner of the repair shop to classify Ron as an employee or as an independent contractor of the repair shop. These permutations of the ABC factors may reveal the extent to which respondents consider these factors in determining Ron's employee classification.
Overtime Pay Results
However, fewer respondents who saw the "slow worker" variant recognized Justin's legal right to overtime. The percentage Justin correctly stated is legally entitled to overtime pay, whether the term was in his contract or. The percentage who said Sarah is legally entitled to overtime pay, based on Sarah's job level and salary schedule.
Minimum Wage Results
But the more likely reason is that the federal minimum wage simply doesn't affect many people. Respondents were much less likely to say that the undocumented worker was legally entitled to a minimum wage. Of course, many states have tipped minimum wages higher than the federal tipped minimum wage.
Compensable Time Results
California's $15 minimum wage that can be tipped would mean Brett is legally entitled to a higher base wage from the eatery in all four variations. Is Justin legally entitled to earn his $15 hourly wage for the 30 minutes he spends [A: putting on and taking off safety gear before and after work / B: waiting in line before and after work]. For both variations, the correct answer is #2, that Justin is entitled to earn his $15 hourly wage for the full hour he spends on the phone on Wednesdays.
Employee Classification Results
- D ISCUSSION
- C ONCLUSION
Third, most of the public does not know what the federal or local minimum wage is. Of all the questions, the respondents did the worst on the questions about naming the minimum wage. Similarly, only sixteen percent of respondents could guess within $1 of their true local minimum wage.
THE ADOPTION OF THE ABC TEST ON EMPLOYMENT OUTCOMES IN
The Classification Problem
This is the test used for the Fair Labor Standards Act as well as the Family and Medical Leave Act and is intended to consider the economic reality of the worker and the employer. Determine employee status after analyzing factors that determine the economic dependence of the worker on the employee. tenant. Factors include whether the worker's services are integral to the business, the duration of the relationship, and the possibility of the worker's financial gain or loss. Outside of the gig economy, traditional employment and independent contracting are becoming harder to distinguish.
The Misclassification Problem
This convergence between behavioral and financial control measures is pronounced among low-income workers and low-income contractors. Referring to this study, the state labor commissioner noted that, based on field experience, the state labor department believed misclassification rates were even higher because of the prevalence of off-the-books work. These off-the-books workers are not officially classified as employees or independent contractors, and audit records would not identify them.
State Reforms to Worker Classification
This law represented the first use of the ABC test in New York State, which continues to use the common law audit test for all other employment law purposes, including unemployment insurance and workers' compensation. These Fair Play Acts could change employment or wage rates through the adoption of the ABC test, coupled with increased penalties for misclassification. First, the ABC test was a new test in New York, while the rest of the state was still using the common law control test.
Financial Incentives of Worker Classifications
- E MPIRICAL M ETHODOLOGY
- T HE E FFECTS OF THE ABC T EST ON E MPLOYMENT AND W AGES
The impact of the Fair Play laws – the implementation of the ABC test and the accompanying enforcement – should be strongest in those industries where misclassification is most prevalent. 2022) use IRS administrative data to show that low-wage workers will report additional self-employment income to take greater advantage of the Earned Income Tax Credit. Keep in mind that the New York ABC law targeted the state's construction and trucking industries. Within New York's construction and trucking industries, the legislative change to the ABC test for worker classification is associated with a decrease in both industries' labor force, as measured by the CPS.
Workforce Size
Some regressions, however, show a smaller decline in the labor force, while some lose statistical significance. Again, this is due to the much smaller industry with fewer observations in CPS-ORG. For construction workers and truck drivers, the regression results are similar to those in Table 2, with a 10% decline in the construction worker labor force and a 14% decline in the truck driver labor force.
Wages
Whether adding or removing industries from the set of comparison industries, the effect of the ABC law on the construction labor force is statistically significant and around 8–14% in almost all regressions. For construction, Table 5.1 shows that wage gains are largely concentrated among Hispanic and less educated workers. While Table 5.2 has large positive estimates for percentage wage growth in the trucking industry, none of the estimates are statistically significant.
New Construction Buildings
While private residential construction is only one segment of the construction industry, there is no indication that the Fair Play Act would have differential effects across the construction industry. Figure 3 below reports data on new private residential construction in New York and indicates the passage of the Fair Play Building Act. Conservative estimates from this study of the effects on construction workers are around an 8% reduction.
