Beth Shulman and Cathy Ruckelshaus
This week the nation's low-wage workers will start to get the raise the country voted to give them as the federal minimum wage hike goes into effect. The pay floor will rise from $5.15 per hour to $5.85, and then to $7.25 in two years.
But will it really happen?
The hike sounds good on paper, and we might assume the new law will shortly put more money into the pockets of the workers who need it most. Unfortunately, it's not that simple. First we need to make sure their employers obey the law, since a lot of employers flouted the minimum wage law even at $5.15 an hour.
Most Americans probably find it hard to believe that many workers are routinely not paid even the minimum wage, or not paid at all for the work they do. But at the bottom rungs of our economy, almost every growing sector has such violations: the health care, child care, retail, building services, construction and hospitality industries are chief among them.
The U.S. Department of Labor says three out of four workers earning $5.15 or less in 2005 were employed in service occupations like food services and hospitality, and that in that year, fully 95 percent of restaurants were not in compliance with the minimum wage. The same was true for 65 percent of hotels and motels, according to a New York University report by economist Siobhan McGrath, and for 60 percent of garment operations and almost 100 percent of forestry companies.
What's going on? Two things: Eemployers are evading the law and our government doesn't seem to care.
Nearly a quarter of all employers-23 percent-are misclassifying more and more full-time workers as "independent contractors," then sub-contracting out work that used to be done in-house, the Labor Department says. This avoids the requirement that employees be paid minimum wage and that employers pay payroll taxes. That is bad not just for workers, but for the Treasury as well, which is losing at least $2.7 billion a year on the dodge. In addition, low-wage jobs are often filled by immigrant workers, who are particularly vulnerable to workplace abuse and exploitation. Many legal immigrants do not know their rights, and those without papers fear speaking up will trigger employer retaliation and threats of deportation.
Employers guilty of such abuses have little to fear from government law enforcement. While the number of workers covered by federal wage and hour laws has risen by 55 percent over the past 30 years, the number of federal inspectors has fallen by 14 percent (to only 788). It's clear, then, why the number of workers who collected back wages fell by 24 percent. During the Bush administration, enforcement funding has declined.
State law enforcement is generally no better. Most state agencies' investigation budgets are very limited, so they often settle workers' claims for pennies on the dollar. Knowing this, low-wage sector employers are engaging in what amounts to systemic violation of wage and hour laws. The few firms that get caught agree readily to the minimal pay-outs, seeing them simply as a cost of doing business.
It wouldn't be hard to stop all this and really deliver on the new law's promise to raise wages for hardworking families. Here's what it would take: First, hire more inspectors and focus them on industries that are known violators of wage and hour laws. (This is part of New York's strategy for combating garment industry abuses.) Second, collect all allowable penalties and damages for violations so employers have some incentive to comply with laws.
Next, step up enforcement against employers in industries where subcontracting schemes are common, and close independent contractor misclassification loopholes in the law. (Several states, such as New Jersey and California, already have worker misclassification initiatives.) Finally, implement "status blind" policies that make immigration status irrelevant to an employer's responsibility to pay minimum wage and overtime. (California, Washington, and New York have already done this.)
Only by holding employers accountable can we hold up the economic floor we have voted to create in the minimum wage. It's time to let low-wage workers actually bring home the raise the nation intended to give them.