Wage theft in Twin Cities costs low-wage workers $86M a year, study finds

Some 32,000 Twin Cities workers are illegally paid less than minimum wage, costing them collectively $86.4 million a year, according to new research findings.

Researchers at Rutgers' Workplace Justice Lab released the analysis on wage violations after studying five years of federal and city data for the metro area.

The study found 32,000 minimum-wage workers from the region were underpaid an average $2,700 a year.

"Unfortunately, we can see from the underlying violation rates that wage theft remains a pervasive issue," said Janice Fine, a labor studies professor and the director of the Workplace Justice Lab. "Our findings point to the urgent need for more investigators and increased support for strong co-enforcement partnerships."

There are about 26,000 minimum wage workers in Minneapolis. It has three labor standards investigators and Mayor Jacob Frey has budgeted to hire one more. This more than meets enforcement recommendations made by the United National Labor Organization.

City Council member Elliott Payne proposed the city arrange to have more consistent funding for community "co-enforcer" groups that help the city find minimum-wage victims. Current funding comes from one-time federal COVID payments.

The city of Minneapolis received 79 public complaints from workers between 2017 and 2022, affecting 677 workers. But when the city separately conducted 43 investigations on its own, it found another 878 worker victims, the Rutgers report said.

The city captured more than $1.6 million in back wages and settlements after investigators worked with community groups and labor unions to identify wage theft victims and hold problematic employers accountable.

"What Minneapolis does is so different" from other cities Rutgers studied, said Steve Flamisch, spokesman for the university's School of Management and Labor Relations.

While Rutgers studied minimum-wage trends in San Francisco, Cook County, Ill., Texas and Washington state, "Minneapolis jumped out at the researchers because it proactively" works with community and labor groups to unearth hidden wage problems and launch investigations, Flamisch said.

"They don't wait for complaints to roll in," he said. "They understand that employees are worried about speaking out and the risk of losing their jobs."

Most minimum-wage violations go unreported, experts said.

To find workers who may not speak English or feel uncomfortable filing a government complaint, Minneapolis works with organizations — including Centro de Trabajadores Unidos En La Lucha (CTUL), Tending the Soil, the New Justice Project and the Restaurant Opportunities Center of Minnesota — to teach workers about minimum wage laws, worker rights and potential remedies so people are properly paid, said Minneapolis Labor Standards Enforcement Director Brian Walsh.

It is often low-paid cooks, dishwashers, launderers, or subcontracted, third-party cleaning crews who are subjected to labor exploitation, Walsh said.

Subcontracting situations complicate matters because those employees work in stores, buildings or companies several layers removed from the direct employer, Walsh said.

Across the metro area, Rutgers researchers found that immigrants, women, Black people, part-time workers and people without a high school diploma were "significantly more likely to be victims of wage theft," the report said.