Under the Radar:

How 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

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?

Defining “unregulated work”

1. Jobs that are legally covered by employment and labor laws, but where employers routinely violate one or more of those laws.

2. 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.

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

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

Industry Clusters Segments with violations Occupations most affected

Construction and landscaping

Private residential, private commercial, smaller public projects

Unskilled and skilled building trades; landscapers

Food retail Supermarkets, ethnic grocery, convenience grocery, “green” grocers, gourmet grocers

Cashiers, sales, stockers, deli/butchers, food prep, cleaners, washing and sorting produce, delivery

Retail (other than food)

Clothing, electronics, ethnic retail, general merchandise, street vendors

Sales, cashiers, stockers, security guards, drivers

Restaurants & food service

Family style (both independent and franchise), white tablecloth, street vendors

Wait staff, cooks, food prep, bussing, dishwashing, cashiers, barbacks, bathroom valets, delivery

Domestic work Families, agencies Nannies (live-in and live-out), babysitters, elder care, housekeeping

Childcare Home-based (publicly subsidized and not) Childcare

Health care Home health care, nursing homes Home health aides, personal attendants, CNAs

Manufacturing Food, apparel, plastics, personal care products

Machine operators, assembly, packing, sewing

Warehousing & logistics

Warehouses, storage Loading/unloading, light assembly, packaging, moving

Laundry Industrial laundries, dry cleaners (retail and plants), coin-ops

Machine operators, coin-op attendants, clerks, equipment cleaners, sewing

Building services Commercial (by building class), residential, industrial

Janitors, security guards, supers, custodians, maintenance

For-hire urban transportation

Yellow & livery cabs, black cars, dollar vans, patient transport vans

Drivers

Auto services Parking lots, car repair, gas stations, car wash

Attendants, mechanics, cashiers, car wash workers

Personal services Beauty salons, nail salons Hair braiders, manicurists, masseuses

Worker mobility

• We’ve found a considerable amount of structure in how workers move between unregulated jobs

1. 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)

2. Pervasive segmentation based on gender, race, and ethnicity3. A variety of labor market intermediaries that channel worker

flows

• Less evidence of jumps to better paid, “regulated” jobs

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

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)

Explanations 1: Demand-side factors

1. Trade-sensitive industries: Global competition puts extreme pressure on US wage floor, e.g. garment industry sweatshops

2. 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)

3. Semi-public industries: Failure of state to adequately fund public goods (home health care, child care) creates “gray” markets of unregulated caregivers

4. 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”).

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

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