Under the Radar: How New Business Strategies Are Moving Jobs Outside the Reach of Regulation

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Under the RadarHow New Business Strategies Are
Moving Jobs Outside the Reach of Regulation

• Annette Bernhardt, James DeFilippis, Nina Martin
  and Siobhan McGrath
• Presented at the Annual Meetings of the
  Industrial Relations Research Association,
  January 2005

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The problem

• On the ground, community groups and unions are
  reporting growing numbers of jobs where core
  employment and labor laws are being broken what
  we call unregulated work.
• Minimum wage and overtime violations, unsafe
  working conditions, discrimination, retaliation
  for speaking up or organizing (e.g. FLSA, OSHA,
  NLRA, Workers Comp)
• Raises a series of questions
• Where do unregulated jobs exist? Who works in
  them? Who are the employers? What are the
  different types of violations?
• How common are workplace violations? Are they
  growing?
• What are the causes and drivers of unregulated
  work?

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Defining unregulated work

• Jobs that are legally covered by employment and
  labor laws, but where employers routinely violate
  one or more of those laws.
• Jobs that are not legally covered by employment
  and labor laws, even though there is effectively
  an employment relationship, and where conditions
  of work consistently fail to meet one or more
  standards of workplace regulation.

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The study

• Three-year study, New York City and Chicago
• Phase 1 Descriptive initial mapping of the
  landscape.
• Phase 2 Understanding the causes shift to
  intensive employer and worker interviews
• Phase 3 Develop survey methodology for
  estimating prevalence
• Data gathered to date
• 392 informants interviewed (workers, employers,
  CBOs, unions, legal aid groups, policy advocates,
  governmental regulatory bodies, industry trade
  groups, service providers)
• Variety of methods (one-on-one interviews, focus
  groups, blitzes)
• Secondary data industry and business press,
  newspapers, academic articles, Census data, FOIA
  data from regulatory agencies

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Some key workplace violations

• Failure to pay minimum wage/prevailing wage
• Failure to pay overtime, and forced off-the-clock
  work
• Not allowing required breaks
• Failure to pay at all
• Failure to pay UI and social security taxes on
  cash wages
• Taking illegal deductions
• Violation of health safety standards
• Failure to provide training on equipment and safe
  work practices
• Failure to carry Workers Comp, and to pay it
  when claimed
• Retaliation against workers filing claims
• Retaliation against organizing
• Discrimination in hiring, promotion, firing
• Failure to comply with FMLA provisions

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Worker mobility

• Weve found a considerable amount of structure in
  how workers move between unregulated jobs
• Strong industry- and occupation-based
  segmentation, with similar dynamics to U.S.
  workforce as a whole (e.g. initial job churning,
  followed by growing tenure in one job type over
  time)
• Pervasive segmentation based on gender, race, and
  ethnicity
• A variety of labor market intermediaries that
  channel worker flows
• Less evidence of jumps to better paid,
  regulated jobs

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How prevalent are violations?

• Very little representative data
• A few DOL establishment surveys in specific
  industries (i.e. random garment sweatshop or
  nursing home inspections)
• Data on actual DOL violation cases are not useful
  for estimation, because of low capture rates
• CPS/Census doubtful
• More common
• Day laborer surveys (random samples of corners)
• Convenience sample surveys of immigrant workers
  in specific cities
• Qualitative interview data

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Methods of regulatory avoidance

• In-house externalization (restaurants, grocery
  stores)
• Subcontracting/temping out for work conducted
  on-site (janitorial firms)
• Subcontracting for work offsite (industrial
  laundries)
• Misclassification of workers as independent
  contractors (day laborers, taxi drivers)
• Trafficking/forced labor (laborers smuggled to US
  to work in restaurants without pay)

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Explanations 1 Demand-side factors

• Trade-sensitive industries Global competition
  puts extreme pressure on US wage floor, e.g.
  garment industry sweatshops
• Domestic industries Economic restructuring is
  putting increasing pressure on labor costs in
  low-wage industries (e.g. industry consolidation,
  deregulation, deunionization, Wall Street,
  Wal-Mart)
• Semi-public industries Failure of state to
  adequately fund public goods (home health care,
  child care) creates gray markets of unregulated
  caregivers
• Local demand for unregulated goods and services
  Growing labor force with very low wages needs
  super cheap goods and services, which in turn
  creates more unregulated jobs (e.g. ethnic
  retail, dollar vans).

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Explanations 2 The role of supply, government
regulation and labor market institutions

• Immigration
• But government policy has been critical in
  shaping both the size and legal status (and
  therefore vulnerability) of immigrant workers in
  the US labor market.
• Other laws and labor market institutions
• Weak enforcement of workplace regulations both
  in terms of resources and in terms of the will to
  enforce
• Decline of unions a critical labor market
  institution that has historically helped to
  enforce workplace standards
• Declining workplace standards for example, the
  fall of the minimum wage has created strong
  incentives for subcontracting

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State local solutions

• Legislation
• Broadening who can enforce (unions, CBOs)
• Protecting workers who bring complaints
  (anti-retaliation)
• Imposing more substantial penalties
• Preventing misclassification of independent
  contractors
• Responsible licensing/contractor laws
• Strengthening existing enforcement
• Resources for DOLs and legal services
• Administrative will
• Creating new enforcement models
• Public-private collaborations
• Sectoral initiatives