Wage theft—yes, that rather sanitized phrase that might make you imagine a clerical error or harmless oversight—is a practice that costs American workers billions each year. It’s not accidental. It’s when employers knowingly shortchange employees, denying them the wages they’ve rightfully earned. What’s even more staggering is that this type of theft is a greater financial drain on American workers than all other forms of theft combined. In a world where we have legal protections, rights, and labor laws, how does wage theft persist at this level, and why aren’t we hearing about it in the same way we hear about other kinds of crime?

 

According to a study by the Economic Policy Institute, wage theft drains anywhere from $15 billion to $50 billion from American workers’ pockets each year, with $8 billion alone stemming from minimum wage violations in low-wage industries (Economic Policy Institute, 2019). The number varies, of course, because many cases of wage theft go unreported. For workers who live paycheck-to-paycheck, losing even $50 a week to wage theft can mean missed rent payments, skipped meals, and a constant, crushing financial strain. And it’s not happening equally across the board—immigrant workers, people of color, and low-wage earners are disproportionately affected (Institute for Policy Studies, 2015).

 

How Does Wage Theft Happen?

Wage theft doesn’t just come in one form, and it’s rarely as simple as an employer refusing to pay. It’s a system of small, frequent violations that add up. Here are some common ways employers engage in wage theft:

1. Unpaid Overtime: This might be the most familiar form of wage theft. Many jobs require overtime, and under the Fair Labor Standards Act (FLSA), most workers should earn time-and-a-half for hours over 40 in a week. Employers circumvent this by failing to track overtime, tweaking hours, or simply refusing to pay for those extra hours worked. In a 2019 report, the National Employment Law Project (NELP) highlighted that more than 2 million workers are paid less than what they’re owed in overtime each year.
2. Misclassification of Employees: In many workplaces, especially in the gig economy, employers label workers as “independent contractors” instead of employees. Doing so allows companies to avoid paying benefits, overtime, and even minimum wage in some cases. This practice is particularly rampant in industries like food delivery, ride-sharing, and contract work. It’s technically illegal when workers lack real autonomy over their schedules and tasks—criteria that would normally classify them as employees, not independent contractors.
3. Minimum Wage Violations: Some employers dip below the minimum wage by creating false payroll records or cutting hours on paper. And the numbers here are shocking. In New York, for instance, researchers found that workers in the construction, retail, and personal services industries reported wage theft so frequently that the losses added up to more than $1 billion annually in New York alone.
4. Withholding Paid Breaks: In most states, workers in physically demanding jobs are legally entitled to paid breaks. But many employers simply don’t grant them, hoping workers either won’t notice or won’t complain. In states like California, where break violations are treated seriously, millions in fines are paid each year by companies who’ve denied workers the chance to rest.

Who’s Most Affected by Wage Theft?

Wage theft’s impacts are most severe among workers who are already economically vulnerable. Immigrant workers, for instance, face a uniquely high risk of wage theft. Fear of retaliation or deportation can discourage them from reporting abuses or asserting their rights, even when they’re legally entitled to their wages. A report from the Institute for Policy Studies notes that people of color and immigrant workers are among the hardest-hit groups when it comes to wage theft, with employers often taking advantage of language barriers or unfamiliarity with labor laws.

 

In industries like agriculture, domestic work, and food service—fields dominated by low-wage and immigrant workers—wage theft is especially pervasive. When companies engage in systematic wage theft against the lowest-paid workers, they’re not just stealing from individuals; they’re also contributing to a cycle of poverty that leaves communities struggling. These losses perpetuate economic inequality, exacerbating the financial divides that keep low-wage workers entrenched in poverty.

Why Does Wage Theft Go Largely Unpunished?

Even though wage theft is illegal, enforcement is tricky. The U.S. Department of Labor’s Wage and Hour Division is responsible for investigating wage complaints, but resources are limited. In 2020, the U.S. Government Accountability Office reported that the Wage and Hour Division had a backlog of thousands of cases, which could take months or years to resolve. This delay means that many workers give up or settle for partial restitution, while employers who engage in wage theft often face few consequences.

 

Another issue is that many workers don’t even know they’re victims of wage theft. In a 2019 survey, the Economic Policy Institute found that roughly 17% of low-wage workers were unaware of their rights to minimum wage and overtime pay . This lack of awareness, combined with fear of employer retaliation, makes reporting wage theft less likely in workplaces that exploit vulnerable populations.

 

The Cost of Doing Nothing

The numbers tell us that wage theft costs low-wage workers more than $8 billion each year. But it’s more than just a financial issue—it’s an ethical one, as well. By normalizing wage theft in certain sectors, society effectively sanctions a system where the lowest-paid workers are denied basic rights. In response, some cities and states have stepped up with measures to prevent and penalize wage theft. For example, states like California have established wage theft task forces that work with advocacy organizations to hold companies accountable.

 

Workers’ rights organizations, like the Workers’ Dignity // Dignidad Obrera, are also fighting back. These groups educate workers on their rights, offer legal resources, and help build coalitions that can apply public pressure on employers who engage in wage theft. But ultimately, real change requires a national conversation on wage theft and stronger enforcement mechanisms. Until then, billions will continue to leak from the pockets of those who can least afford to lose it.

 

Why Wage Theft Should Matter to All of Us

Wage theft may seem like something that only affects the lowest-paid workers, but it ripples through the economy in ways that impact all of us. When workers are denied fair wages, they’re less able to participate in the economy, support local businesses, or invest in their futures. The problem is vast, systemic, and largely hidden in plain sight. Addressing wage theft means more than ensuring workers get what they’re owed—it’s a step toward an economy that truly values the contributions of every worker.