Good Jobs First Fuels Research on Wage Theft

September 19, 2022

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The Good Jobs First Violation Tracker is a gold mine of information on corporate misconduct and lawbreaking. With over 522,000 civil and criminal cases dating back to the year 2000 and updated quarterly, it is your one-stop shop for regulatory actions by dozens of federal agencies, the Department of Justice, state attorneys general, hundreds of state regulators, and an increasing number of class-action lawsuits, including wage theft collective action lawsuits. In all, the database covers actions by more than 400 agencies resulting in $804 billion in penalties.

What can you do with all that information? In this post, we begin to explore that very question.

One basic, but crucial, value is the ability to cut through corporate public relations noise. For example, many companies claim to be good stewards of the environment. Violation Tracker lets you see their actual environmental track record. It is a powerful tool to see if a company is telling the truth. And you also can do that with seven other broad types of violations plus miscellaneous offenses.

Economic development and government procurement officials can use this information to weed out bad actors. A state, local, or even national economic development agency, or purchasing office, naturally wants to support good jobs, but with Violation Tracker it can determine if a company actually cheats its workers, ravages the environment, defrauds consumers, engages in price-fixing, and so on.

This brings us to academic research using Violation Tracker on “wage theft,” such as denying workers overtime pay, paying less than the minimum wage, or forcing them to underreport hours worked. The federal Fair Labor Standards Act is enforced by the Wage and Hour Division of the U.S. Department of Labor (and state wage laws are enforced by respective states). Guilty companies are forced to provide back wages and to pay penalties to the Department of Labor. These sanctions are increased for corporations that commit repeat offenses.

Using both Violation Tracker and Subsidy Tracker in his research, Prof. Aneesh Raghunandan (London School of Economics) analyzes numerous aspects of wage theft in his 2021 Review of Accounting Statistics article, “Financial misconduct and employee mistreatment: Evidence from wage theft.” One important finding is that companies are more likely to engage in wage theft when they are in danger of not meeting stock analysts’ earning expectations, so they cheat their workers to be more profitable. He also finds that after a corporation is caught using wage theft, there is a higher chance that it will subsequently engage in financial misconduct, due to the likely higher penalties if it gets caught engaging in wage theft again.

Both of these findings have concrete takeaways for policymakers. For an economic development official, the fact that a company is a wage thief means it is more likely to be a troublemaker in the future, so it should be a less valuable “target” firm than one with a clean track record. For the Wage and Hour Division specifically, Prof. Raghunandan suggests that the office should take a company’s financial incentives into account when the agency makes up lists of firms to audit for violations. As he concludes, “…my findings suggest potential benefits to the Department of Labor in explicitly accounting for firms’ financial incentives in setting enforcement priorities.”

Also using both Violation Tracker and Subsidy Tracker, Profs. Justin Chircop (Lancaster University), Monika Tarsalewska (University of Exeter), and Agnieszka Trzeciakiewicz (University of Hull) have a working paper, “Government Procurement and Wage Theft,” which reinforces some of these points. Their numerous statistical tests show that companies receiving government contracts are less likely to commit wage theft. They believe that the higher level of oversight connected to government contracts covered by Federal Acquisition Regulations explains the difference.  
They also found companies receiving economic development subsidies are just as likely to engage in wage theft as other firms. In other words, even though governments routinely attach wage rate rules or other safeguards such as clawbacks onto incentive deals, procurement-related monitoring is better at deterring wage theft.

Taken together, these papers highlight the importance of government as a crucial player to reduce wage theft, especially by providing enforcement-policy guidance. Both show the usefulness of Violation Tracker and Subsidy Tracker in informing academic research with useful applications.

Kenneth Thomas is a senior fellow at Good Jobs First and Professor Emeritus of Political Science at the University of Missouri-St. Louis.

This is one in a series chronicling the ways academics have used the work of Good Jobs First in their research. We hope it’ll spark related and additional research, and show the practical ways our data can be used to inform debates and ultimately make economic policy more just and equitable.

Read more:

Good Jobs First Data Fuels Research On Economic Inequality