Wage Inequality and Labor Rights Violations
43 Pages Posted: 30 Sep 2020
Date Written: August 13, 2020
Wage inequality does not fully capture differences in job quality. Jobs also differ along other key dimensions, including the prevalence of labor-rights violations. Yet, there is little systematic evidence on this non-wage dimension of job quality and how it contributes to overall inequality. We use a combination of systematic legal violations data from federal agencies, and local industry employment data. We construct novel measures of labor violation rates and show they are positively correlated with worker survey reports of adverse working conditions, establishing their validity. Within local industries over time, a 10% increase in the average local industry wage is associated with a 0.15% decrease in the number of violations per employee and a 4% decrease in fines per dollar of pay. Increases in worker power measured by reduced labor market concentration and increased unionization are also associated with reductions in labor violations. Overall, we conclude that labor violations are regressive: they deepen wage inequality by increasing inequality in job quality.
Keywords: wage differentials, inequality, worker power, labor rights
JEL Classification: J31, J83, J32, J33, J28, K31, K42
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