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Low Wages Don’t Just Mean Poverty — They Mean Less Rights and Power on the Job

New research shows why inequality is even worse than it looks on paper. Thanks to weak leverage, the same workers who earn the lowest wages also suffer the worst violations of labor rights at the hands of employers.

Workers at the General Electric Company make flood lights in 1935. (William Vanderson / Getty Images)

Consider two workers, write the authors of new research circulated by the National Bureau of Economic Research. These workers have identical productivity, but one has less bargaining power with her boss than the other. The worker with less bargaining power is more vulnerable to the employer’s whims and less able to fight back against them. She’ll have lower pay, of course, but that’s not her only problem.

An employer might claim greater value from the employment relationship both by paying lower wages and by violating the worker’s labor rights, such as requiring work in unsafe or unhealthy conditions (OSHA), shorting on overtime pay (WHD), or discouraging union organizing by threatening to fire union sympathizers (NLRB).

Low pay and violations of her rights: the two conditions go hand in hand. That’s the conclusion Ioana Marinescu, Yue Qiu, and Aaron Sojourner reach in their paper, “Wage Inequality and Labor Rights Violations.” As Marinescu told MarketWatch, the findings suggest that prior research on wage inequality “understates the true level of inequality since workers who get paid less are more likely to have their rights violated.”

The authors analyzed labor violations using a database compiled by Good Jobs First, which compiles violations reported between 2000 and 2019 to the Occupational Safety and Health Administration (OSHA), the Department of Labor’s Wage and Hour Division (WHD), and the National Labor Relations Board (NLRB).

They find that within local industries, “a 10% increase in the average wage is associated with a 0.15% decrease in the number of violations per employee and a 4% decrease in fines per dollar of pay.” As wages go up — and here, they don’t mean because of legislative mandates raising minimums, but rather as a reflection of employers’ demand for workers — violations go down. When workers have leverage, it affects far more than just wages.

The authors find further evidence of this relationship: where unionization is higher, violations are lower. Unions are a means of workers acting collectively, which multiplies their bargaining power. As such, they offer workplace protection against labor violations. In the opposite direction, local industry employment concentration, which reduces a worker’s ability to quit a job and find employment elsewhere, is associated with an increase in violations. If your employer is the only game in town, they have more power over you.

The findings are particularly salient in light of the past year. The pandemic has decimated the United States, but not all workplaces were affected equally. Many “essential workers” are paid low wages, working in the private sector, where unions are scant. Frequently, their employers are the biggest, most stable employers in their area — think meatpacking plants or warehouses. As COVID-19 increased unemployment, workers’ bargaining power further eroded — the boss knew he could find replacements among the many people desperate for work. All of this led to health and safety violations in certain “essential” workplaces, with devastating COVID-19 outbreaks among already ill-treated and underpaid workers. (When workers did file complaints with OSHA, the agency often failed to act, anyway, clearing the way for employers to continue violating the law.)

Workers’ testimony bears this out. Eighty-five percent of Chicago-area food workers surveyed in a recent report say that their employer either didn’t respond to workers’ complaints, retaliated against workers who spoke up with concerns about the employer’s handling of COVID-19, or took action that didn’t improve the situation. Grocery store employees are similarly ambivalent. People need leverage to win better working conditions: that means unions, social safety nets to decrease the risks of speaking up, and institutions that have their back. Without these foundations, employers won’t just underpay them, they’ll violate their most basic rights.