Fredy Moreno had been working as a house painter for a few weeks in March when he began to suspect that his boss had no intention of paying him. “He told me that he was going to pay me on a certain date, then moved that date,” Moreno said through an interpreter. “Then he made an excuse — that he’s in the hospital.”
But because the pandemic had just hit and he worried about finding another job in a recession, he decided to keep working. By the time he cut his losses a few weeks later, Moreno, who lives in the Minneapolis area and has sought help from the worker organizing group CTUL, was owed more than $13,000, according to his estimates. He said he had yet to receive any payment.
Even in the best of times, workers in industries like construction, apparel, food and domestic work can have trouble collecting some or all of the compensation they are due — especially if they are people of color or women, or lack U.S. citizenship or union representation. But during a recession, the problem — known as wage theft — tends to increase significantly.
According to a paper released Thursday by the Washington Center for Equitable Growth, a liberal think tank, the rate at which workers suffered violations of minimum-wage law increased almost in lockstep with the unemployment rate during the last recession. On average, the workers on the receiving end of these violations lost about one-fifth of their hourly wage.
The paper’s numbers show that more than 20% of low-wage workers were probably paid less than what the law requires in April, when the unemployment rate peaked, up from just over 10% before the pandemic.
There are two key reasons, beyond the obvious problem that employers are stretched thin during a recession. First, as in Moreno’s case, workers have fewer job options when the economy is weak, making it harder to stand up to employers that shortchange them.
“In slack labor markets with high unemployment, we know that workers are just going to be less likely to come forward because they’re more afraid of losing their jobs,” said Janice Fine of the Center for Innovation in Worker Organization at Rutgers University, who led the team that conducted the research.
In addition, labor regulators often have fewer resources to devote to enforcement during a recession, as cities and states cut their budgets.
The lack of effective regulation reverberates through entire industries, Fine and her colleagues write: Unchecked wage theft allows unscrupulous employers to undercut their law-abiding competitors and puts pressure on those competitors to shortchange their workers as well.
Several workers and labor advocates echoed the paper’s conclusions and said the problem of wage theft had grown more acute in recent months.
“Wage theft and a myriad of labor abuses have increased during the pandemic, and they’ve increased on an already vulnerable population,” said Angeles Solis, the lead organizer for Make the Road New York, a group that promotes the interests of immigrant workers.
In some cases, employers that had been obeying wage laws before the pandemic simply ceased doing so after it hit, counting on workers’ reluctance to push back.
But often the changes that push workers below minimum wage are less overt. Restaurant suppliers like bakeries scaled back workers’ hours and laid off many of them during the pandemic, driving workers who had made the minimum wage or more into less stable, lower-paying gigs, said Gabriel Morales, the program director for Brandworkers, a group that organizes workers in the specialty food-making industry.
“People are being pushed into even more exploitative sectors of the economy,” Morales said.
One such worker is Eloisa Veles in New York, who lost her factory job during the pandemic and turned to domestic work. A few months ago, Veles said, a family agreed to pay her $600 for a week of housekeeping but at week’s end offered her only $300. She says she refused to accept the lower payment and even involved the police, but she said she had yet to receive any of what she was owed.
Tipped workers are also at increased risk of earning less than the legal minimum during a recession. Most states allow a lower minimum wage for tipped workers, but federal law and some states require employers to make up any shortfall between what the workers earn after tips and the regular minimum wage. As tipping income has collapsed, many employers have not made up the shortfall.
In a survey of about 250 restaurant workers by One Fair Wage, a group that seeks to require employers to pay all workers the full minimum wage, more than half who responded definitively said they had taken home less than the minimum wage even after tips at some point. A large majority said their tips were down at least 50% during the pandemic, suggesting that many are now falling well below the regular minimum wage. The survey was taken in Massachusetts, New York, Illinois and Washington, D.C.
“This violation of the law — tips not bringing workers to the full minimum wage — is happening much more regularly,” Saru Jayaraman, the group’s president, said in an email. Jayaraman’s group organized a strike by tipped workers in New York and Chicago on Monday to demand that employers pay the regular minimum wage before tips. She said pressure from workers in recent months appeared to have already changed behavior among some employers.
Kymani Hill, a worker in Chicago, said he recently quit a restaurant job that sometimes paid him $8 or $10 for a night of work. “It was better before COVID,” said Hill, who helped lead the Chicago strike. “As soon as COVID hit, stuff got bad. Not much money was coming in.”
According to Fine and her colleagues, violations persist in part because of the way regulators approach enforcement. The researchers note that most cities and states largely rely on workers to file complaints to generate investigations rather than inspecting workplaces without prompting.
The problem, the authors argue, is that the workers most vulnerable to exploitation are often the least likely to speak up — both because they tend to be less aware of their rights and because they fear retaliation — so regulators end up devoting more resources to more compliant industries. And recessions tend to compound that pattern as workers become even more fearful of complaining.
One alternative that the authors recommend is known as strategic enforcement, in which regulators focus on influential employers in industries that are rife with lawbreaking, and act aggressively when they find violations.
“There’s kind of this assumption when you have high unemployment in an economy like this that you have to support small business, have to ease up on enforcement,” Fine said. “Our view is that is a really, really bad idea. When you do that, you can end up permanently damaging wage standards. It’s exactly the time you have to make sure wage standards are respected.”