Cambridge, MA, May 23, 2024 (GLOBE NEWSWIRE) -- Labor laws are meant to protect workers' health and livelihoods. However, according to an April report from the Education & The Workforce Committee Democrats, the penalties companies face for violating the laws — including the minimum wage law — rarely match the severity of their offenses. In fact, according to Anna Stansbury, the Class of 1948 Career Development Assistant Professor at the MIT Sloan School of Management, it often makes more financial sense for companies to violate wage law than to comply.  In a new working paper, Stansbury used cost-benefit analysis to demonstrate how current minimum wage enforcement structures in the United States and the United Kingdom incentivize noncompliance and quantify the policy changes needed to protect workers.  Wage theft is widespread in both the US and the UK In the United States, the Fair Labor Standards Act (FLSA) sets out a nationwide minimum wage, as well as overtime protections. While some states set their own higher minimum wages that supersede federal law, 40% of the country's workers live in the 21 states where the FLSA minimum wage prevails. In the United Kingdom, the same minimum wage statute applies country-wide.  While the scope of unidentified noncompliance is difficult to measure, surveys and spot checks suggest wage theft is a significant problem in both countries. In the U.S., random inspections have found that as many as 40% of fast-food restaurants and 85% of garment industry employers were underpaying workers.  But why is noncompliance so widespread when it carries legal and financial risk? To answer that question, Stansbury drew on two decades of data on wage violation cases and penalties to compare the profits a firm might realize from breaking the law to the potential costs of ...