Food Stamps, Unjust Enrichment and Minimum Wage

Abstract

A number of large retail chains with monopsony power, such as Walmart, pay their low level employees so little that these employees are eligible for food stamps and other governmental benefits. In addition to paying low wages, these chains often have hourly restrictions so that their employees are not eligible for overtime pay. At times the chains violate the wage and hour provisions of the Fair Labor Standards Act (FLSA) by making hourly employees work “off the clock,” a practice known as wage theft.

One of the reasons these low wage retailers can pay so little is because their employees can supplement their income with food stamps. Another reason is the minimum wage of $7.25 per hour has not been raised since 2009. Paying anything more seems generous.

Whether to raise the minimum wage is fiercely disputed. This paper suggests the debate focus not only on the effect of the minimum wage on jobs, but also on the unjust enrichment of monopsonistic employers. By applying the law of unjust enrichment (also referred to as restitution), the government should be able to recover from these employers the amount of food stamps their low paid employees receive at taxpayers’ expense. A lawsuit in unjust enrichment should make the public aware that with food stamp payments and other benefits, the government is subsidizing monopsonistic employers.

Keywords: unjust enrichment, restitution, fair labor standards act, FLSA, minimum wage, wage and hour laws, wage theft, food stamps, poverty, walmart, monopsony

JEL Classification: D63, E24, J38, K19