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Cracking Down on Wage Theft: State Strategies for Protecting Workers and Recovering Revenues

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One year ago, New York State took a major step to simultaneously plug its budget deficit and improve millions of families’ economic security. The Wage Theft Prevention Act, which went into effect April 9, 2011, should help the state recover up to $427 million each year in lost revenue from underpayment of wages – amounting to $1.5 billion per year for workers in New York City alone. The revenue so recovered would more than make up for the state’s projected $350 million budget gap, an important signal to other states that have not begun to address this problem.

The significance of New York’s action could not be greater. Working families throughout the country continue to experience a perilous decline in economic security in the aftermath of the Great Recession. Incomes for the bottom 99% remain stagnant, while those of the top 1% have risen to record highs – a picture that is even worse for those in lower-wage brackets. The federal minimum wage has remained the same, while low-wage employment has risen significantly, exposing more workers to ruthless labor practices that proliferate in lower-wage sectors like retail and food service.

Several states are acting to relieve this pressure by strengthening their wage payment laws. Wage theft, or the non-payment or under payment of wages, is a problem affecting millions of workers across the country. Over 60% of low-wage workers suffer wage violations each week. As a result, they lose 15% of their earnings each year, on average. The vast majority of these workers are over the age of twenty-five, and most are supporting at least one child.

Employers who engage in wage theft are not just stealing from hard-working families. By not paying workers what they are owed, dishonest businesses not only place law-abiding employers at a competitive disadvantage. They slow down the economic recovery by depressing consumer spending needed to fuel economic growth and defrauding taxpayers to the tune of millions of dollars.

This brief previews a forthcoming Progressive States Network report on state wage theft laws by taking a closer look at the WTPA and comparing it to model policies being advanced in the states. Our forthcoming report will measure states’ existing wage theft laws against a comprehensive set of those model policies.