Employment and Jobs

Restoring the Commitment to a Fair Day’s Pay for a Fair Day’s Work

April 29, 2022  • Economic Opportunities Program

People work for a variety of reasons and rewards. Some people work because it gives them purpose and dignity. Others see work as a social network and community. A job may provide workers with access to healthcare and retirement benefits. Even with all of these rewards and benefits, there is no escaping the fact that the paycheck people earn for their labor is a big driver of their employment choices. However, for millions of workers, that paycheck is simply too small to make ends meet. Fifty-two million, or almost one-third of workers in the US earn less than $15 an hour. Women and people of color make up a disproportionate share of these workers.

The Fair Labor Standards Act (FLSA) of 1938 is the primary law governing salaries and wages at the federal level. The law established the federal minimum wage and overtime pay, created a standard workweek, and ended dangerous child labor. But policymakers have been slow to update the law’s provisions in recent years. The federal government has not raised the minimum wage—currently at $7.25 per hour—since 2009, and the tipped minimum wage has remained at $2.13 per hour for three decades. These low floors for wages shrink further each day as inflation rises and eats further into people’s pay. Other policy choices on the overtime threshold and wage enforcement have also decreased people’s earnings. Overtime pay once covered over 60% of workers, but only covers about 15% today. And economists estimate that $15 billion is stolen each year from workers by their employers, with immigrants, Latino, and Black workers more likely to become victims of this theft.

Earlier this month, the Aspen Institute Economic Opportunities Program gathered a panel of experts to discuss lessons from the Fair Labors Standards Act. This event was the second discussion in our series The History of US Labor Law: Conversations to Shape the Future of Work. David Weil, a dean and professor at the Heller School for Social Policy and Management at Brandeis University opened the event by describing the history of the Fair Labor Standards Act, its ongoing importance, and the challenges and opportunities the law presents in protecting workers in today’s economy.

The law has weaknesses including the deliberate exclusion of certain occupations from its protections, which disproportionately harm women and people of color. And enforcement is vastly under-resourced. Still, the law’s importance cannot be overstated, and the workplace norms it sets are critical to shaping employment and the labor market. “Those norms don’t arise from the voluntary agreement of a specific company or group of companies and aren’t reliant on the forces of supply and demand,” Weil said. “Instead, the power of the FLSA emanates from its creation of wage norms by the force of law.” He cited research that showed the expansion of the FLSA in the 1960s helped reduce racial wealth and income gaps.

Weil concluded his remarks by discussing the dangerous influences money in politics has on expanding and enforcing workplace protections. There are reasons to be optimistic as workers begin to organize. “This moment represents an important opportunity to seal in better and sustainable norms through the full and fair enforcement of the FLSA. By doing so alongside increasing the minimum wage at the federal level as states have already done so across the nation, we can achieve the time-honored phrase: a fair day’s pay for a fair day’s work. And we can see that the gains from a growing economy are shared with the working people who make it possible.”

Following these remarks, Noam Scheiber, author and reporter for the New York Times, moderated a conversation between Rebecca Dixon, Executive Director of the National Employment Law Project; Michael Lastoria, founder and CEO of &pizza; Teresa Romero, president of the United Farm Workers; and Ben Zipperer, an economist at the Economic Policy Institute.

Scheiber opened the conversation by talking about the importance of understanding the FLSA, particularly as it relates to the issue of employee classification. Workers classified as independent contractors are not protected by the FLSA, and thus, are not entitled to minimum wage or overtime pay. Many employers, Scheiber noted, say stronger regulations of employee classification will harm flexibility for workers and employers. He dispelled this notion, stating, “We have tons of examples of flexible work relationships with employees. We have part-time employees. We have seasonal employees. We have employees who work from home. We have employees who work partly from home and partly from an office. We have employees who work full-time but at odd hours. There’s almost no limit to the amount of flexibility that you can introduce into the employment relationship when you have employees.”

Panelists then engaged in a discussion about the strengths and challenges of the FLSA. Rebecca Dixon underscored that while the law importantly sets a floor for wages, the law excluded many occupations that women and people of color worked in at the time the law passed. Those exclusions have rippled through time to the present day and continue to be a driving factor in occupational segregation and trapping people in low-wage jobs. “Opportunity is quite segregated in this country, and our labor law is really key in enshrining that and perpetuating that segregation. For example, 40% of our jobs in this economy pay poverty level wages, but the burden of these bad jobs is uneven. It falls most heavily on women and workers of color,” Dixon said.

Teresa Romero of the United Farm Workers talked about the exclusion of agricultural workers from the FLSA and the slow progress that has taken decades to achieve. She noted that the first states in the nation including California, Washington, and Oregon only recently approved legislation to provide workers with overtime pay. Other basic protections such as the right to safe working conditions in extremely hot weather are also just coming to fruition. “These are just basic things that any other industry would have, but it takes us decades to be able to get these protections,” Romero said. She also lamented the failure to address farm workers’ citizenship status. “The great majority are undocumented and without these workforce, the agriculture industry in this country would probably disappear.”

Ben Zipperer then discussed the evolution of research on the minimum wage. He noted that through the 1980s, many scholars and economists believed setting higher minimum wages caused catastrophic job loss. Research in the 1990s and 2000s showed this not to be true and instead indicated promise for implementing economic policies that better support workers. “Minimum wages tend to raise wages, but without much job loss, and the fact that the minimum wage increases can lead and have led to little or no job loss has very profound implications for what is possible with good economic policy,” Zipperer said.

Building on Zipperer’s remarks about the minimum wage, Michael Lastoria, co-founder and CEO of &pizza, explained how paying workers more at &pizza and providing them good jobs drives the company’s success. The restaurant chain pays an average wage of about $18 an hour, with goals of getting to $20 per hour soon. The company currently has 65 locations and plans to add another 35 this year. “Something that gets lost in the conversation about wages in particular: it’s actually good business. Higher wages for us has led to greater consumer spending, greater workforce productivity — things every company benefits from,” Lastoria explained. When asked why more businesses don’t follow the example of his company and others that provide good jobs, Lastoria said too many businesses have a “legacy mindset” that has failed to tap into diversity of thought and are driven by short-term incentives.

Zipperer and Dixon then discussed the challenges of the FLSA, independent contractors, and gig work in particular. Zipperer remarked, “We have gig worker companies that are basically arguing that they’re not subject to minimum wage protection or anti-discrimination protection, workers’ compensation, or unemployment benefits.” Zipperer noted that we saw an expansion of labor laws to more people in the 1900s, but recently worker rights seem to be contracting. Dixon explained that while we treat disputes over employee classification as new, these issues are not new and affect opportunities for an estimated 23 million workers, many of whom are people of color. When given the choice between a lower-paying job in the service sector or the gig economy, many workers will choose the gig job because of the flexibility, Dixon observed. “You’re taking the best of a bad option. That’s because you don’t have power in the labor market, which is deeply rooted in race and gender discrimination and our history of structural racism in this country,” she stated.

The panelists wrapped up the discussion with a focus on strengthening the FLSA and improving enforcement. Romero highlighted the challenge of enforcing laws to protect farmworkers and the importance of collective bargaining. She remarked, “The laws in the books are not the laws in the fields. There are laws that exist to protect workers, but there is no way to enforce them. The only way we have been able to enforce these laws is through a union contract.” Romero discussed ongoing challenges with child labor, workplace violence, wage theft, and the fear of retaliation. “[Workers] know that if they say something, they’re going to be threatened with being fired, and because we have many family members that work in the same farm, it is not just one person that might get fired. It is the entire family that might get fired,” she explained.

Ben Zipperer commented that the penalties for violating labor laws are too low to dissuade employers from doing so. “Protecting the right to organize act would help to address employer misclassification by increasing the penalties for employer aggression, and would do a lot to increase worker bargaining power and affect wages throughout the wage distribution,” he elaborated.

Zipperer and Dixon reiterated the positive impact a higher minimum wage could have. Dixon remarked, “We know that for Black workers in particular, the majority of them live in the south. The Southern states generally don’t have a state minimum wage. So, the only way those workers are going to get a raise to $15 is if the federal government passes.” Lastoria added his support for a higher minimum wage and the elimination of sub-minimum and tipped wages. “Everyone should be working off of a minimum wage. Minimum wages need to increase across the board in this country,” he said.

David Weil rejoined the discussion with Dixon to discuss enforcement and how the government can be more strategic. He voiced support for proactive government and private enforcement strategies, explaining that workers who are most likely to be a victim of a violation are often the least likely to complain. “A complaint-driven mechanism …also ties up resources that can have much more impact if you think about systemic problems and trying to root out some of the underlying economic drivers for non-compliance and wage theft by thinking more proactively,” he stated.

Dixon raised that many workers have to sign arbitration agreements preventing them from taking legal action against their employer for issues such as wage theft. Federal and state government enforcement is critical in these cases, and collaboration with community-based organizations can help in identifying violations and supporting workers to come forward. “The community-based organizations have been transforming the culture for workers around speaking up and using their power,” she explained.

Throughout the conversation, the panel discussed a variety of challenges to ensuring workers receive fair pay. Exclusions of certain occupations and independent contractors from FLSA protections, structural racism and discrimination, lack of adequate resources for enforcement on issues such as wage theft, inaction by policymakers, and outdated thinking from policymakers and business leaders on the effects of higher minimum wages have all contributed to wage stagnation and low wage jobs in the economy. Fears of widespread job loss or business closures, as Zipperer and Lastoria explained, are particularly misplaced given recent research. Lastoria argued that good business leaders will always adapt, and closed by saying, “People are always going to be creative, and we have to lean on the fact that as a country, if we’re lifting up the lowest wage workers — if we’re taking care of them — any policy that does that is good policy. Everything else will be figured out along the way.”

Join us for this five-part discussion series, The History and Future of US Labor Law: Conversations to Shape the Future of Work, where we will reflect on the law, examine current implications and challenges, and discuss how we can shape a future of work that provides opportunity and dignity to all.

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March 28, 2022 • Economic Opportunities Program