Wage Crimes

WAGE CRIMES ARE violations of laws, treaties, or international conventions (hereafter simply, laws) that govern wage rates, work hours, and other aspects of employment for specific categories of workers. The concept is sometimes used more generally to cover any abusive practices related to wages or working hours. Wage laws are based on the idea that there is an inequality of bargaining power between workers and employers, with employers holding a stronger position than workers.

As a result, wages might be “too low,” while other working conditions, such as working hours, might also be worse than they should be. Such inequality of bargaining power is most pronounced when workers are less skilled and less informed about their options in the labor market. Because highly skilled workers are usually paid far more than the legally mandated wage rates, wage laws usually come into play only for the benefit of those workers least able to defend their own interests.

The standards by which wages are judged to be too low or working conditions too bad vary depending on the context, and are not always well-defined. Often, such judgments can be moralistic. Sometimes, they are based on economic, legal, or social theories. From the viewpoint of mainstream (neoclassical) economic theory, each worker's wage is determined by the marginal product of labor for a worker in that category. This is equal to the extra revenue that a company would receive from one additional unit of labor by a worker of that type. As a result, many mainstream economists often dismiss wage laws as either superfluous or harmful. However,

A wage earner's pay slip, usually attached to the check, should explain all income and deductions for a pay period.

[Page 850]the mainstream theory of wage determination has definite flaws. It is based on a model of competitive labor markets that never exists in the real world, and assumes that employers can determine worker productivity with a precision that is impossible except in very simple situations which are not the norm.

From the viewpoint of some worker advocates, including some economists, wages are determined not by the marginal product of labor but by the relative bargaining power of businesses and workers. Because the individual worker's livelihood depends on securing employment, while a business can almost always be profitable without a particular worker, the worker is in an inherently weaker bargaining position than the employer. As a result, wages are set below the marginal productivity of labor, whatever it is, while any surplus is reaped by the employer as additional profit. This view also has its problems, but it has the merit of being closer to reality than the neoclassical theory.