Estimating the Impact of Wage Violations on Minimum Wage Workers

The Fair Labor Standards Act sets national standards for a minimum hourly wage, maximum hours worked per week at the regular rate of pay, and premium pay if the weekly standard is exceeded (overtime pay). When businesses violate the FLSA and state labor laws, the result is not just lost wages, but effects on workers and families far beyond the dollar amount lost. To better understand the implications of minimum wage violations, the U.S. Department of Labor asked ERG to estimate their economic impact on California and New York.

ERG estimated the number of minimum wage violations in California and New York, and the amount of lost wages attributable to those violations. We also estimated the number of families in poverty, tax revenues lost, and additional government spending on social support programs attributable to minimum wage violations.

The results of the study were featured in the business pages of the New York Times and other major media outlets. They showed that more than 300,000 workers in each state suffered minimum-wage violations each month, resulting in thousands of families living below the poverty line, millions of dollars of lost wages per week, millions of dollars of lost state tax revenues, and additional millions of dollars in school meal costs.