No Such Thing as Free Labor: An Analysis of Wage Theft Legislation in the United States

Abstract

The purpose of this paper is to give preliminary insight on the efficacy of recent legislation passed to combat wage and hour violations commonly known as wage theft. This illegal withholding of wages distorts information used by employees opting to engage in labor, exacerbates negative economic aspects of low-income communities, and is approximated to be a multi-billion dollar predicament. By means of difference-in-differences analysis, we explore effects of legislation implemented in several states that introduces criminal penalties for, and heavier prosecution of, wage theft offenses. Our analysis results yield no detectable legislative impact on withheld wages returned to victims, but do obtain robust indication of legislative effects in other dimensions of wage theft data, including a statistically significant reduction of willful violations in states that implemented policy.