Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295905 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16882
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
There is substantial evidence of minimum wage noncompliance in the US and the UK. In this paper, I compile new, comprehensive data on the costs minimum wage violators incur when detected. In both countries, the costs violators face upon detection are often little more than the money they saved by underpaying. To have an incentive to comply under existing penalty regimes, typical US firms would thus have to expect a 47%-83% probability of detection by the DOL, or a 25% probability of a successful FLSA suit. In the UK, typical firms would have to expect a 44%-56% probability of detection. Actual probabilities of detection are substantially lower than this for many firms, and would likely remain so even with realistic increases in enforcement capacity. Improved enforcement alone is thus insufficient: expected penalties must also substantially increase to ensure that most firms have an incentive to comply.
Subjects: 
minimum wage
labor standards
compliance and enforcement
industrial relations
JEL: 
J38
J58
K31
Document Type: 
Working Paper

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