Workers lose $900 million per year through wage theft, report finds

An estimated 250,000 Iowa workers are losing out on more than $900 million per year due to wage theft, a newly released report from Common Good Iowa finds. That statistic accounts for about one in seven workers and their families, according to a release. “This insidious and growing problem costs Iowans 10 times more than all other forms of theft combined,” said Sean Finn, author of the report entitled A Heist in Plain Sight: Wage Theft in Iowa, in a statement. "These long-ignored problems are a public policy failure. Lawmakers and state agencies have been aware of this issue for at least a decade, but have been unwilling to take action." Wage theft is defined as an employer paying less than the full wages to which the worker is legally entitled. It is commonly found in low-paying positions such as food service, hospitality, nursing, child care and construction, and often affects vulnerable workers (such as disabled employees, immigrants or those with language barriers). Employers also commonly mislabel employees as independent contractors, which employers use to illegally dodge contributions to unemployment insurance, workers' compensation and payroll taxes. Based on analysis of 2017-19 Bureau of Labor Statistics data and Iowa Workforce Development and U.S. Department of Labor enforcement records, workers lost $501 million in overtime violations and $241 million in minimum wage violations. The issue affects local governments too. Each year, wage theft causes Iowa to lose $190 million in lost tax revenue. For every $1,000 in wages stolen from Iowa workers, understaffed government agencies recover just two dollars.

Labor organizations fight back against wage theft

In the Corridor, the Center for Worker Justice (CWJ) of Eastern Iowa helps affected workers advocate for themselves and recoup earned wages. The group has taken on numerous cases of wage theft since 2012 and has recover wages for workers at IHOP, Outback Steakhouse, Taco Bell and other local establishments. “Workers have to take many steps just to get paid the wages they are owed. CWJ serves as an advocate for workers, and with the help of unions and other allies, we help workers take matters into their own hands,” said Mazahir Salih, executive director of CWJ. The 2022 Common Good Iowa report shows wage theft is getting worse. In 2012, the organization estimated Iowa workers lose an estimated $600 million each year through wage theft, while the state missed out on about $60 million in unpaid tax revenue. The new report marks a 50% increase. The state only employs two wage claim investigators, despite nearly 1.6 million claims. “Better enforcement begins with having enough staff to do the job and by removing unnecessary barriers for victims,” Mr Finn said. “Iowa Workforce Development places a $6,500 cap on wage claims, which means the worst cases are the first ones ignored.”

Strengthening the law, he explained, would include tougher fines and damage awards to reverse the incentive for employers to cheat workers. Current penalties are barely a slap on the wrist, even for repeat violators, and employers are rarely caught. Workers need greater protection from retaliation. He also said workers need to learn their rights — in collaboration with trusted community labor organizations like the CWJ — particularly because victims must file a claim or find legal representation, a difficult process more complicated than just going to the police. “Funding these higher-road approaches are an investment necessary to correct the problem. They can pay for itself several times over,” he said. “Thousands of Iowa workers go to work each day thinking they are protected, that laws require their employers to pay them the right amount on time,” said Paul Iversen, a labor educator at the University of Iowa Labor Center who has worked on wage theft cases and informing workers of their rights. “Sadly, for many Iowans that just isn’t true. The laws exist, but they are ignored, and a law is only as good its enforcement.”