Minimum wage violations are a growing problem

Hiring surged last month, according to the August jobs report released on Friday.

But alongside that, the Federal Reserve Bank of Cleveland found in a recent report that minimum wage violations — employers underpaying their workers — has been becoming a growing problem. It found that in the 10 most populous U.S. states, a record 5% of workers legally entitled to the minimum wage were actually paid below that last year.

Youha Kim, research analyst at the Cleveland Fed, worked as a pizza delivery driver as a teenager in Indiana.

“There were some really slow days where I was thinking to myself, ‘Am I at least earning, like, minimum wage right now?’” he said.

Now 23, Kim is still wondering if he was shortchanged. He co-authored the report, and said while 5% of workers may not sound like much, it represents “roughly 5 to 6 million workers.”

Kim said underpayment is most common in hotels, grocery stores, and restaurants, or for people providing personal services, like housecleaners or caregivers.

Jenn Round, who works with the Workplace Justice Lab at Northwestern University, said underpayment can be a problem at businesses that hire subcontractors.

“They’re going to try to undercut wages in order to provide the cheapest bid to win the contract,” she said.

The Cleveland Fed report said many states have limited staff to enforce their minimum wage laws, leaving workers to navigate the process of filing a complaint or lawsuit on their own.