Does government contracting influence wage theft?

Abstract

Wage theft is the largest form of theft committed in the U.S. It includes the lack of payment for overtime hours or forcing employees to underreport hours worked. We examine the relation between government contracting and wage theft and find that contracting with government agencies is related to a reduction in wage theft. Further analysis shows that this relation is driven by contractor improved financial reporting. Cross-sectional analysis suggests that this relation is more pronounced when there is greater scope for government monitoring of its contractors and contractors have fewer incentives to commit wage theft. To mitigate endogeneity concerns we perform differences-in-differences identification tests based on first time government contractors and the Obama Administration government contracting reform.

Keywords: government procurement, wage theft, employee wellbeing

JEL Classification: G18, G38, G39, J31, J83, M14, M41