The Lost Wages of the Poor
KNAPPMAN, EDWARD W.
The Lost Wages of the Poor by EDWARD W. KNAPPMAN FOR THE fifth time since adoption of the Fair Labor Standards Act in 1938, Congress has increased the minimum wage. The latest improvement is...
...It is almost like a Chamber of Commerce budget as far as I am concerned...
...Edward 1. Weintraub, information man in the Labor Department's New York regional office, compressed the Division's orthodox catechism into two concise sentences...
...Sometimes they are loath to even approach us to complain because they distrust government and don't realize it's our job to protect them...
...LUNDQUIST: 50,000 roughly come into business each year...
...After setting Lundquist up, the Congressman moved in for the clincher: MR...
...Meanwhile, of course, the employer-for a time, at least-has managed to score an advantage over his competitors and to fatten his bank account with money rightfully owed to his employes...
...If he is found guilty, the employer is fined a few hundred dollars plus court costs...
...FLOOD: You will not be able to THE PROGRESSIVE put a glove on them, will you...
...The Federal minimum wage and overtime provisions -and their enforcement-are still a long way from meeting the standard of effectiveness required to protect those on the bottom rungs of the labor force from being cheated out of several hundred millions in wages year after year...
...the dollar value of underpayments reached $74 million annually, a 500 per cent increase over a decade ago...
...FLOOD: Then answer it...
...FOGARTY: -What part of your workload is going down...
...This would be one method of penalizing employers who flout the law knowing that at worst they will have to pay, eventually, only what they should have paid in the first place...
...MR...
...If an employer proves particularly stubborn, the Department may get up the pluck to ask him to sign a consent decree in which he vows future obedience to the law...
...MR...
...But this method is so rarely used that it long ago withered from neglect...
...No one, that is, except a few Labor Department bureaucrats...
...Including the wages retrieved through all types of litigation, the amount recovered in recent years represents only five per cent of the total lost wages, according to statistics taken from the Secretary of Labor's annual report to Congress...
...During the first six months of fiscal 1966 the division unwvered $46 million in underpayments, which may be as little as one-fourth EDWARD W. KNAPPMAN, a writer on economic affairs, was formerly on the staff of the U.S...
...MR...
...Perhaps one of the most effective measures would be the addition of an amendment modeled on a provision of the Oregon minimum wage law which adds a six per cent annual interest charge to the underpayment debts of the employer...
...You won't even make as many investigations in 1967, according to your own report, as you made in 1964...
...FOGARTY: How many businesses that are covered do you expect will go into business and then out again during the year...
...By apprising employers of their responsibility under the law . . . the Division helps business establishments keep in compliance...
...LUNDQUIST: We believe sincere ly, Mr...
...FOGARTY: How many establishments are covered under the law...
...MR...
...Teper had prescribed five years as a more appropriate remedy in view of the infrequency of Federal inspections...
...LUNDQUIST: In 1965 we expect to visit somewhat over 55,000...
...Enforcement of minimum wage and hour provisions is dependent upon onthe-scene inspections...
...Teper and the ILGWU proposed that the Secretary of Labor be given the right to collect underpayments on behalf of the workers 'in all cases...
...Three central defects have crippled effective enforcement of the Federal law...
...MR...
...The employes who pay most dearly for this Division's kindly approach to minimum wage violators are those who can least afford it-the uneducated and the unskilled...
...But others manage to underpay employes without taking such risks...
...LUNDQUIST: No, not as well as I would want to...
...Until we have evidence to the contrary, we assume the employer is acting out of ignorance rather than malice...
...FLOOD: The fact of the matter is that you can't enforce it on this budget...
...The letter, however, includes a reservation of neutrality which proclaims that the Department "does not encourage or discourage employes to exercise these rights...
...The Lost Wages of the Poor by EDWARD W. KNAPPMAN FOR THE fifth time since adoption of the Fair Labor Standards Act in 1938, Congress has increased the minimum wage...
...the new law includes this extension...
...FOGARTY: You know what...
...While the number of complaints has steadily risen, the number of investigations has hovered around 55,000 year after year...
...To rectify partially such injustices, the Department of Labor suggests that the employer make restitution to his workers...
...FOGARTY: How many are you going to visit during 1965...
...MR...
...the number of underpaid employes rose over that ten-year period from 120,000 to 505,000...
...Since there is a statute of limitations, employers are requested to restore only two years of arrears even if they broke the law for ten...
...a large number of employers defraud their workers on both counts...
...In 1964, the percentage was down to forty-three...
...labor Department...
...The experience of government has been that if any law is to be effective, it must be more than a mere moral guideline for good behavior...
...There was almost no scrutiny of how well or badly the Fair Labor Standards Act has been enforced over the years...
...The only certain cures for the Wage and Hours Division's lethargic performance would be a transfusion of new blood and a strengthening of the enforcement provisions of the Fair Labor Standards Act...
...But Representative Flood was less than sanguine after learning from Lundquist that total violations probably amounted to more than $300 million a year...
...One Manhattan vegetable distributor swindled his employes out of more than a thousand dollars by paying less than the minimum and less than the full overtime wage...
...The end result, in Representative Fogarty's words, is that the "increase of underpayments compared to the amount of payments agreed to be repaid is getting way out of line...
...These figures disclose that between the fiscal years 1955 and 1964 the number of complaints received jumped from 9,000 to 23,000...
...LUNDQUIST: We think we are doing pretty well...
...In a report to Congress last Spring, the Wages and Hours Division estimated that verified underpayments will reach the $85 million mark this year...
...The 969 inspectors-down a dozen from a year agoemployed by the Division are charged under the present law with protecting thirty million workers in more than 1.1 million stores, factories, and offices...
...Lundquist's sentiments are equally revealing: "Twenty years of experience in administering the act," he wrote in a report to Congress, "has confirmed the Division's opinion that an effective method of obtaining compliance is one that prevents violations from occurring...
...Lazare Teper, research director of the ILGWU, told a House subcommittee on labor last year...
...MR...
...Lundquist voiced this parsimonious ideology before the Fogarty committee's hearing on the 1966 budget: MR...
...Most cases involve a failure to pay either the minimum wage or the full overtime rates...
...The enforcement net strung by the Wages and Hours Division of the Department of Labor is knit so loosely that few employers need feel menaced by its authority...
...This, in effect, does discourage them for, as the International Ladies Garment Workers Union argues, "Many workers do not know their legal rights or fear loss of their jobs if they sue their employer for underpayments...
...The latest improvement is the most sweeping of all with the new legislation adding eight million workers to the thirty million already covered and setting a new standard of $1.60 an hour as the minimum wage to take effect in 1968 for most of the workers...
...Employers found to be paying less than the minimum wage or failing to pay overtime rates called for by Federal law are asked only for a promise of future compliance and for restitution of the original underpayments...
...Many of them, especially those who don't speak English, don't even realize there is a minimum wage and overtime law...
...MR...
...LUNDQUIST: About 1,100,000 establishments...
...No one really knows, with certainty, how many violations go undetected...
...the dollar value of all violations in that period...
...Lundquist himself apologized to a 1961 conference of state minimum wage administrators that inspections had to be restricted to those businesses where there was good reason to believe a violation existed because if a blanket inspection were to be made it would take twenty years to reach all the firms covered by the law...
...But in the midst of all the publicity over the battle on Capitol Hill to increase the minimum wage and expand its coverage, something of vital importance was overlooked by the press, by nearly all Congressmen and Senators, and nearly all unions...
...If there had been a searching inquiry, Congress and the public would have learned that the appointed sentries have fallen asleep at their posts...
...MR...
...The matter is left to the discretion of the employes...
...This unimpressive performance can be traced in part to the gentlemanly courtesy with which the Labor Department treats violators...
...If he rebuffs this proposal, the Department shifts the responsibility for enforcement to the very workers it failed to protect...
...FOGARTY: What part of your workload is going down...
...Third, the officials responsible for enforcement genuflect before the American business shrine and accept on faith the righteousness of too many of its individual priests and communicants...
...FLOOD: What are you, Houdini...
...I don't believe you...
...The Secretary of Labor may bring suit on behalf of the workers if they request him to and if there is no new issue of law involved...
...LUNDQUIST: What part...
...During 1964, with more than double the number of complaints and triple the dollar value of underpayments, the division took up only 1,157 civil and forty-three criminal cases...
...Second, the penalties meted out to violators are so merciful as to be more of an invitation than a deterrent...
...Statistics taken from the Department of Labor's Annual Report over a decade underscore the gullibility and negligence of the guardians of minimum wage and overtime regulations...
...That was a year during which there were only 10,000 complaints and $20 million worth of violations...
...Dr...
...The undermanned enforcement net will be more inadequate than ever when called upon to cover the new industries and the eight million workers who will be added to the thirty million employes included under the present law...
...It is only when such an employer goes back on his word that the Department considers initiating prosecution on a civil contempt charge...
...Criminal contempt charges are pressed only if the defendant is an incorrigible violator...
...MR...
...This is the worst budget I have seen in many years," said Representative Fogarty as he closed the hearing...
...I get the impression that you may get your nose below that waterline during the next year...
...Clarence Lundquist, the Wages and Hours Division's top official, falls into that sparsely-populated category of government officials who ask Congress for even less money than it is willing to appropriate...
...Although the law itself lacks sinew, the source of many enforcement deficiencies flows from the apathy of those who administer the law...
...A New Jersey brush manufacturer skimped on the paychecks of seven employes to the amount of $1,309 over two years...
...Pause) Did you hear what I said...
...We estimate," Lundquist acknowledged at this year's Congressional hearings, "that by visiting five per cent of the establishments covered we have been able to find about twenty-five per cent of the wage violations occurring...
...Representative Flood evidently would vote for this year's budget as the worst ever...
...Lundquist's division was succinctly condensed by Robert R. Richmond, its director of public relations, in an interview with the author...
...When an infraction is uncovered, a Wage and Hours investigator pays a friendly call on the employer and explains the provisions of the law and the nature of the violation...
...In 1958 the division filed 1,100 civil and 131 criminal actions...
...Without tightened enforcement provisions, the Wages and Hours Division will face an impossible task when the time comes to enforce the new minimum wage law...
...This benign concept continues despite the fact that the Department of Labor regularly mails explanatory guides, pamphlets, posters, and other assorted documents to every firm, corporation, and employer subject to Federal minimum wage and overtime regulations...
...LUNDQUIST: Well, that is a difficult question to answer when you say what part of the workload...
...FLOOD: Don't be evasive...
...At another point, this exchange took place: 29 MR...
...LUNDQUIST: Yes...
...In 1958, the Labor Department convinced or December, 1966 coerced employers to pay back fifty~ six per cent of the value of disclosed underpayments...
...Their negligence is being paid for by the nation's poor-Negroes, Puerto Ricans, and unskilled whiteswho are bilked of millions of dollarsprobably more than $300 million a year-of wages due them but never paid...
...Even the minority who are caught have little to fear...
...The guiding philosophy of Mr...
...The fine levied and collected for an underpayment is, almost without exception, equivalent to only a fraction of the profits and competitive advantage an employer has already gained by shortchanging his workers...
...Two "compliance surveys," one in 1957 and one last year, attempted to determine the number of violations that go unreported and unrectified...
...The existing enforcement provisions . . . have to be modified in order to assure employes that the monies legally due them can be recovered more effectively," Dr...
...I give cooperation from industry," he declared...
...Even when they are attempted, "such actions," as an ILGWU representative reminded a Congressional committee, "do not restore to the workers wages legally due them...
...The inadequacy of this sample Inspection was brought out in an exchange between Clarence T. Lundquist, administrator of the Wages and Hours Division, and Representative John Fogarty, Rhode Island Democrat, before a House appropriations subcommittee hearing last year on the division's budget for fiscal 1966: MR...
...Can you enforce the existing wages and hour law on the budget you just presented to this committee...
...President Johnson's sole recommendation for improving minimum wage enforcement was a proposal to lengthen the statute of limitations from the present two years to three years...
...We hope to make as many investigations, perhaps we will be making some fewer investigations, but our findings in the investigations that we are making are going up...
...I get the impression," he told Lundquist, "that you are barely keeping your nose above water...
...Chairman, that we will effec tively and efficiently carry out a vigor ous enforcement program with the funds we are requesting in order to in sure that workers are paid in accord ance with the minimum standard un der the act...
...FLOOD: You can't enforce the one [law] in front of you...
...After a long cross-examination, he finally backed Lundquist into a corner: MR...
...There are more apt to be violations where uneducated workers are employed," Weintraub admitted during the interview...
...Curiously, both surveys were stamped "strictly internal...
...This stick was wielded but once during the past decade in the New York-New Jersey region, one of the busiest in the nation...
...During the hearings this spring on the fiscal 1967 budget for the Division, Representative Daniel Flood, a Democrat from Pennsylvania, took up the same line of questioning...
...First, the men and dollars available for inspection and prosecution are too few...
...The percentage who are willing or who are forced to make restitution is declining...
...Each year they manage to inspect a little less than five per cent of their domain...
...Since that job has yet to be done adequately enough to win anyone's trust, Congress should begin a penetrating examination of past and present enforcement failures and a study of possible improvements...
...We think this is a good record," he added...
...We're striving for voluntary compliance and we're getting tremendous "Me worry...
...His technique was to falsify employment records...
...Even for the unlucky few who do become entangled, there is little reason for trepidation...
...Most violations," he told me, "are by employers who just don't understand the provisions of the law...
...All an employer need do at this point to escape punishment is agree to comply with the law in the future and promise restitution...
...Another possibility is an adequate extension of the statute of limitations so that violators can be brought to account over a longer period after the violation takes place...
...LUNDQUIST: No, but I hope we put a bare hand on them and grab those in violation...
...While the number, size, and value of underpayments multiplied, the vigor and effectiveness of enforcement remained as languid as ever...
...A form letter is sent out notifying these employes of their right to institute a civil suit for the recovery of illegally withheld wages...
...This impressive advance represents a notable victory for the Johnson Administration, which proposed the legislation, and for organized labor, which conducted an all-out campaign for its passage...
...It must make the punishment for violating the law greater than the profit likely to be realized from breaking it...
Vol. 30 • December 1966 • No. 12
