Combatting Wage Theft in California

May 12, 2014

Wage theft — when employers fail to pay workers what they are legally owed — is an all-too-common issue for low-wage workers. Wage theft can occur in a number of ways, such as when an employer pays an employee less than the minimum wage or fails to properly compensate for overtime. Wage theft is especially prevalent in low-wage industries, thus hitting a segment of the workforce that is already economically vulnerable.

A number of studies have exposed both the frequency of wage theft and how challenging it can be for workers to recover the wages they are owed.  Specifically, these studies show that:

  • Wage theft is a widespread and persistent problem. According to one survey from 2008, more than two-thirds of low-wage workers in Los Angeles, New York City, and Chicago experienced at least one pay-related violation in just the prior week. The authors calculated that this translated into an average $2,634 wage loss per year for a full-time, full-year worker. A 2010 report that builds off that survey, but focuses only on Los Angeles, provides additional detail on the types of wage theft that occurs: Nearly 30 percent of workers sampled from low-wage industries were paid less than the minimum wage (with a majority of them being underpaid by more than $1 an hour) and 16.9 percent of the workers surveyed were not paid the legally required overtime rate when it was due.
  • Workers face an uphill battle in recovering lost wages. A 2013 study by the UCLA Labor Center and the National Employment Law Project details just how difficult it can be for California workers to recover stolen wages. This study, relying on administrative data from the California Division of Labor Standards Enforcement (DLSE), found that between 2008 and 2011 only 42 percent of wages verified by DLSE as being owed were actually paid back to workers: Of the approximately $390 million owed to workers, only $165 million was recovered.

These numbers show the need for reform of how vulnerable workers can recover lost wages. Workers and state officials currently lack the tools or resources necessary to adequately enforce the law. Even among workers who speak up and pursue legal action, the prospects of recovering lost wages are grim. The current legal process is lengthy and complicated, and guilty employers can confuse the process by changing business licenses or by transferring assets after a claim is won.

This week, legislators will decide the fate of AB 2416, a bill that aims to level the playing field by expanding workers’ legal ability to recover stolen wages. This bill would expand to more workers the right to record and enforce a lien against an employer, thus giving them an additional tool to fight wage theft. It’s worth keeping an eye on this bill and other efforts to combat wage theft in California.

— Luke Reidenbach

 


New Census Data Show That California’s Poverty Rate Remained High in 2012, Despite Economic Recovery

September 18, 2013

A new CBP report looks at the Census Bureau data released yesterday, which show that despite the state’s emerging economic recovery, California’s poverty rate was essentially unchanged in 2012 — at 15.9 percent — and remained about one-third higher than in 2006, the year before the recession began. The new Census data show that more than 6 million Californians had incomes below the federal poverty line and that 2.1 million of the state’s children — nearly one out of four — were living in poverty.

The new Census data also show that the state’s median household income in 2012 was $57,020, nearly 10 percent below what it was in 2006, after adjusting for inflation. One positive trend in the new Census data is in the area of health coverage, with a significant year-to-year drop in the share of Californians who are uninsured as well as longer-term gains in providing health coverage for children.

Like our recent report on employment and earnings in California, this new analysis underscores that many of the state’s residents continue to face severe economic challenges in the aftermath of the Great Recession. That’s why it’s critical that policymakers sustain a strong social safety net for individuals and families, while also making the necessary public investments in education, job-related services and supports, and other foundations of widely shared economic growth.

— Steven Bliss


New Data Highlight the Nation’s Uneven Recovery

September 12, 2013

A new analysis from the University of California, Berkeley’s Emmanuel Saez shows that income inequality at the national level has grown during the economic recovery, with only the wealthiest seeing significant income gains. The data can be downloaded as a Microsoft Excel file here. Here are some highlights:

  • Income gains were uneven. Between 2009 and 2012, the last full year for which data are available, the average inflation-adjusted family income grew by 6.0 percent. However, incomes grew by 31.4 percent for the top 1 percent of families and only 0.4 percent for the bottom 99 percent.
  • These uneven gains come after severe drops during the Great Recession. According to Saez, the average inflation-adjusted income per family declined by 17.4 percent between 2007 and 2009, the largest two-year drop since the Great Depression. The top 1 percent saw even greater losses of income, with a decline of 36.3 percent.
  • For high-income earners, the impact of the Great Recession was temporary. Even though the top 1 percent of families saw far more severe drops in average income during the recession than did other families, this was only temporary. As Saez writes, “Overall, these results suggest that the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s. Indeed, the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.”

These new data show a trend we highlighted last week in our annual Labor Day report: Large groups of workers are not yet seeing a recovery. Here in California, wages remain depressed relative to their pre-recession levels for all but high-wage earners, and wage inequality continues to rise even as the labor market has grown for more than three years.

— Luke Reidenbach


Some of California’s Wealthiest CEOs Run Corporations That Paid No Federal Income Tax

November 4, 2011

The gap between the wealthiest Californians and the less well-off has widened substantially in recent decades, as illustrated in a new CBP report, A Generation of Widening Inequality. The average income of the middle fifth of California’s taxpayers was approximately $35,000 in 2009 – almost 15 percent lower than in 1987 on an inflation-adjusted basis. In contrast, the average income of the top 1 percent was $1.2 million in 2009 – approximately 50 percent higher than in 1987, after adjusting for inflation. That means the average Californian in the top 1 percent earned in less than eight workdays what the average middle-income Californian earned in a year.

Who are the wealthy? Contrary to popular perception, entertainers and professional athletes make up just a small fraction of the wealthiest 0.1 percent of US taxpayers. Instead, six out of 10 of the top 0.1 percent are executives, managers, or financial professionals. And according to Forbes, many of the nation’s highest-paid executives run California-based companies, including Walt Disney’s CEO, Robert A. Iger, whose annual compensation of $53.3 million makes him the third-most-highly compensated chief executive of a US company.

Interestingly, a report released yesterday by Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP) shows that some of the most highly compensated CEOs run California-based companies that paid no federal income tax in recent years, even though these companies earned profits. For example, San Francisco-based PG&E paid no federal income tax in 2008, 2009, or 2010 even while it earned profits in each of those years totaling nearly $5 million. In addition, San Diego-based Sempra Energy paid no federal income tax in 2008, even though the company earned a profit of more than $1 million that year. According to Forbes, the annual compensation of PG&E’s CEO, Peter A. Darbee, was $7.3 million last year, while that of Sempra’s CEO, Donald E. Felsinger, was $20.6 million.

The CTJ and ITEP report examined a total of 280 companies on the Fortune 500 list that were profitable in each of the last three years and provided sufficient and reliable information in their financial reports about their profits and taxes paid. Overall, 78 of the companies (27.9 percent) paid no federal income taxes in at least one of the past three years.

— Alissa Anderson


Deep Poverty Stands in Stark Contrast to Vast Wealth

September 23, 2011

Additional Census Bureau data released yesterday provide a fuller picture of the Great Recession’s human cost. The share of the population living in deep poverty, with incomes below half of the federal poverty line (FPL), increased in 40 states, including California, between 2007 and 2010. Last year, more than two out of five Californians living in poverty – 2.5 million people – had annual incomes below half of the FPL, which was just $11,000 for a family of four with two children. That’s an income well below what’s sufficient for an adequate standard of living, particularly considering California’s high cost of living. Fair market rent for a two-bedroom apartment in Los Angeles, for example, totaled $17,000 last year.

The depth of poverty of millions of Californians stands in stark contrast to the vast wealth in our state. The latest Franchise Tax Board (FTB) data show that millionaires, who represent just 0.2 percent of California personal income taxpayers, had combined adjusted gross incomes of $104 billion in 2009. That’s 11 times the income needed to lift every single Californian out of poverty ($9.3 billion), according to the latest Census data. The data also show that California ranks seventh in the nation for the widest gap between rich and poor. That gap has widened in both California and the nation as a whole over the past generation as income gains largely accrued to the very top of the distribution. The total income for all of California’s taxpayers increased by over $200 billion between 1987 and 2009 – the longest period for which FTB data are available. More than a third of that increase (35.5 percent) – about $78 billion – went to the wealthiest 1 percent. That’s an amount just less than the size of California’s 2011-12 budget going to fewer than 145,000 people – approximately equal to the number of residents of Humboldt County.

— Alissa Anderson


Rising Poverty Could Limit Our Future

September 14, 2011

The income and poverty data released yesterday by the Census Bureau paint a sobering portrait of the economic hardship facing millions of Californians, many of them children. Last year, 2.2 million California children lived in poverty. This is nearly one out of four (23.4 percent) of the state’s children, up from 18.1 percent in 2006, the year before the recession began. In fact, the number of children living in poverty in 2010 exceeded the combined populations of the cities of San Diego and San Francisco.

We all should be deeply concerned about rising poverty among California’s children. Poverty imposes enormous costs on society through the lost potential of children who grow up in families with very low incomes. Children raised in poverty tend to have lower levels of educational attainment and lower earnings as adults, and they are more likely to remain in poverty later in life. That means rising poverty could diminish the productivity of our future workforce and limit our ability to compete in an increasingly globalized economy.

Even poverty brought about by downturns in the economy can have devastating consequences for children. One analysis of families who fell into poverty during a national recession concluded that the children in those families:

Will live in households with lower incomes, they will earn less themselves, and they have a greater chance at living in or near poverty as adults. They will achieve lower levels of education, and they will be less likely to be gainfully employed. Children who experience recession-induced poverty will even have poorer health than their peers who [stay] out of poverty during the childhood recession.

Given that the Great Recession was far more severe than any downturn in recent history, its impact on children – and society as a whole – is likely to be more substantial than that of prior recessions, with longer-lasting consequences.

Rising childhood poverty highlights the need for policymakers to provide a solid safety net for families most affected by the downturn. Even a modest boost to very low-income families’ incomes – such as the boost provided by the federal Earned Income Tax Credit – can increase children’s opportunities later in life. Research shows that a $3,000 annual increase in income for families with incomes below $25,000 can boost the future earnings of children raised in those families by nearly 20 percent.

— Alissa Anderson


Where Has All the Income Gone? Look Up.

September 10, 2010

Here’s a picture that really is worth a thousand words. We came across this chart by the Economic Policy Institute on Washington Post journalist Ezra Klein’s blog. It shows that nearly two-thirds of the income growth since 1979 has gone to the top 10 percent of US taxpayers – a truly stunning statistic.

We were curious what the data show in California so we replicated this chart using Franchise Tax Board data, which are only available between 1993 and 2008. Here’s what we found.

Two-thirds of inflation-adjusted income gains went to the top 10 percent of California taxpayers between 1993 and 2008. That means that in 2008 just under 1.5 million Californians had among them a total income of $469 billion dollars – roughly equal to Switzerland’s economy, the 19th largest economy in the world. Even more stunning is the fact that nearly 40 percent of inflation-adjusted income gains during this period went to the top 1 percent of California taxpayers. That means that in 2008 fewer than 150,000 Californians had a total income of $208 billion dollars among them – roughly equal to Ireland’s economy, the 37th largest economy in the world.

How did low- and middle-income Californians fare during this period? Just 10 percent of inflation-adjusted income gains between 1993 and 2008 went to the 8.7 million Californians in the bottom three-fifths of the income distribution. And that modest gain was entirely driven by population growth, not income growth. The total number of Californians in the bottom three-fifths of the income distribution rose by 22.2 percent between 1993 and 2008. Their average inflation-adjusted income, however, fell by 2.3 percent. In other words, there were many more low- and middle-income Californians in 2008, each with a slightly lower income, on average, than in 1993.

— Alissa Anderson