ror.org/046rm7j60
Abstracts
Summary
Wage lien laws have immense potential to help workers collect owed wages. Because liens can secure rights to property before full adjudication, workers can rest assured that real assets will exist should they prevail and scofflaw employers cannot easily hide assets from collections. Despite the proven usefulness of wage lien laws, opponents frequently argue that broad lien regimes would restrict credit.
We use a difference in differences regression analysis to test this argument, using data from the US Small Business Administration 7(a) loan program. We look to two multistate metropolitan areas in the United States with divided wage lien regimes – Chicago and Washington DC. In each case, wage lien laws are permitted in one state (Wisconsin and Maryland, respectively) and not allowed in others (Illinois and Indiana for Chicago, Virginia for Washington).
We test the argument against wage liens through regression analysis, looking at gross approvals and interest rates as a reflection of risk. We also aggregate observations by 4-digit NAICS code, by lending institution, and by ZIP postal code and reran regression analyses. The wage lien law treatment did not lower the gross approval amount of 7(a) loans in either market, and did not increase the interest rate faced by borrowers. Indeed, results, while mostly statistically insignificant, in some cases showed the opposite effect. Although these tests do not definitively prove that wage lien laws do not constrict credit flows to small businesses, they provide absolutely no evidence to support such an argument either. The findings thus support the position of advocates supporting wage lien laws as a common-sense tool in the arsenal against wage theft, while casting substantial doubt on oppositional claims against wage liens.
Abstract
This article evaluates the impact on business access to credit of wage lien laws, which are an important tool for low-wage workers to reduce wage theft. Worker advocates have tried to expand access to wage liens. Opponents argue that wage liens negatively impact business access to credit. Using data from the Small Business Administration 7(a) loan program, one of the only detailed sources of business loan data, we assess whether lien laws affect business access to credit in two states—Wisconsin and Maryland—using a difference-in-differences framework. We find no evidence to support wage lien opponents’ claims that lien laws reduce credit access. The findings contribute to the understanding of wage liens and provide evidence in support of policies that protect workers.
Keywords:
- wage liens,
- wage theft,
- small business loans,
- difference-in-differences analysis
Résumé
Les lois sur les privilèges salariaux (Wage lien law) ont un immense potentiel pour aider les travailleurs à recouvrer les salaires dus. Parce que les privilèges peuvent garantir les droits de propriété avant la répartition des sommes, les travailleurs peuvent être assurés que les actifs réels existeront s'ils l'emportent lors d’un litige; les employeurs escrocs ne pouvant pas facilement cacher les actifs. Malgré l'utilité avérée des lois sur les privilèges salariaux, les opposants soutiennent fréquemment que ces régimes de privilèges restreindraient le crédit disponible.
Nous utilisons une analyse de régression pour vérifier cet argument, en utilisant les données du programme de prêt 7(a) de la US Small Business Administration. Nous regardons deux zones métropolitaines multi-états aux États-Unis avec des régimes de privilège salarial divisés - Chicago et Washington DC. Dans chaque cas, les lois sur les privilèges salariaux sont autorisées dans un état (Wisconsin et Maryland, respectivement) et n’existe pas dans les autres (Illinois et Indiana pour Chicago, Virginie pour Washington). Nous testons l'argument contre les liens salariauxen examinant les approbations brutes et les taux d'intérêt comme un reflet du risque. Nous agrégeons également les observations par code SCIAN à 4 chiffres, par banque, et par code postal ZIP et refaisons les analyses de régression.
Le traitement prévu par la loi sur les privilèges salariaux n'a pas réduit le montant brut d'approbation des prêts 7 (a) sur l'un ou l'autre marché et n'a pas augmenté le taux d'intérêt auquel sont confrontés les emprunteurs. En effet, les résultats, bien que pour la plupart statistiquement insignifiants, ont dans certains cas montré l'effet inverse. Bien que ces tests ne prouvent pas définitivement que les lois sur les privilèges salariaux ne restreignent pas le crédit, ils ne fournissent absolument aucune preuve pour étayer un tel argument non plus. Les résultats soutiennent ainsi la position des défenseurs soutenant les lois sur les privilèges salariaux en tant qu'outil de bon sens dans l'arsenal contre le vol de salaire, tout en jetant un doute important sur les réclamations de l'opposition contre les liens salariaux.
Précis
Cet article évalue l’impact des lois sur les privilèges salariaux sur l'accès des entreprises au crédit. Constituant un outil important pour les travailleurs à bas salaire afin de réduire le vol de salaire, les opposants affirment plutôt que les privilèges salariaux ont un impact négatif sur l'accès des entreprises au crédit. En utilisant les données du programme de prêt 7(a) de la Small Business Administration, l'une des seules sources détaillées de données sur les prêts aux entreprises, nous évaluons si les lois sur les privilèges affectent l'accès des entreprises au crédit dans deux États - le Wisconsin et le Maryland - en utilisant un cadre de différence dans les différences. Nous ne trouvons aucune preuve pour soutenir les affirmations des opposants au privilège salarial selon lesquelles ces lois réduisent l'accès au crédit. Les résultats contribuent à la compréhension des privilèges salariaux et fournissent des preuves à l'appui des politiques qui protègent les travailleurs.
Mots-clefs:
- privilège salariaux,
- vol de salaire,
- prêts aux entreprises,
- analyse des différences
Appendices
References
- Adler, Laura, Zach Genduso, and Victoria Lee (2019) “Finding A Better Contractor: How Municipalities Can Help Prevent Wage Theft Through the Contracting Process.” White paper. The Wage Justice Center. Google Scholar Search this bibliographic reference on Google Scholar
- Ashenfelter, Orley and Robert Smith (1979) “Compliance with the Minimum Wage Law.” Journal of Political Economy 87 (2): 333-350.10.1086/260759 Google Scholar Search this bibliographic reference on Google Scholar
- Ayer, John, Michael Bernstein, and Jonathan Friedland (2004) “Priorities.” ABI Journal 23 (6): 18-20.Google Scholar Search this bibliographic reference on Google Scholar
- Bates, Timothy and Alicia Robb (2013) “Loan Availability Among Small Businesses Operating in Urban Minority Communities.” Paper presented at the Federal Reserve System Community Development Research Conference on Resilience & Rebuilding for Low-Income Communities, Atlanta, GA, USA. April 11, 2013.Google Scholar Search this bibliographic reference on Google Scholar
- Bernhardt, Annette, Ruth Milkman, Nik Theodore, Douglas Heckathorn, Mirabal Auer, James DeFilippis, Ana Luz Gonzalez, Victor Narro, Jason Perelshteyn, Diana Polson, and Michael Spiller (2009) Broken Laws, Unprotected Workers. Los Angeles: UCLA Institute for Research on Labor and Employment.Google Scholar Search this bibliographic reference on Google Scholar
- BGFRS (2021) Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks. Retrieved from FRED, Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/series/BUSLOANS (April 23, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- Bhorat, Haroon, Ravi Kanbur, and Benjamin Stanwix (2019) “Compliance with Labor Laws in Developing Countries.” IZA World of Labor, June. 10.15185/izawol.80.v2 Google Scholar Search this bibliographic reference on Google Scholar
- Black’s Law Dictionary (1999) Black’s Law Dictionary, Seventh Edition. Bryan Garner (ed.) Saint Paul, MN: West Group.Google Scholar Search this bibliographic reference on Google Scholar
- Bobo, Kim (2009) Wage Theft in America. New York: The New Press. Google Scholar Search this bibliographic reference on Google Scholar
- Brunelle, Christian, Annette Hayden and Gregor Murray (2011) “Employee Representation in the New World of Work: The Dynamics of Rights, Voice, Performance and Power.” Relations Industrielles/Industrial Relations 66(4): 503-511.
10.7202/1007630ar
Google Scholar
Search this bibliographic reference on Google Scholar
- Buckley, Michelle (2020) “Mapping Wage Theft in the Informal Economy: Employment Standards Violations in Residential Construction and Renovations.” Relations Industrielles/Industrial Relations, 75 (3), 502-525.10.7202/1072345ar
Google Scholar
Search this bibliographic reference on Google Scholar
- CA CoC (2013) “AB 1164 (Lowenthal) Liens: Employees and Workers Scheduled for Hearing – May 1, 2013 OPPOSE JOB KILLER.” Letter of opposition to the California State Assembly Committee of Labor and Employment. April 25, 2013.Google Scholar Search this bibliographic reference on Google Scholar
- CALI (2013-13a) “AB-1164 Liens: Employees and Workers.” California Legislative Information website. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB1164 (April 24, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- CALI (2013-14b) “AB-2416 Liens: Laborers and Employees.” California Legislative Information website. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB2416 (April 24, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- Card, David and Alan Krueger (1994) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania.” The American Economic Review, 84 (4): 772-793.10.3386/w4509 Google Scholar Search this bibliographic reference on Google Scholar
- Cho, Eunice, Tia Koonse, and Anthony Mischel (2013) Hollow Victories: The Crisis in Collecting Unpaid Wages for California’s Workers. Los Angeles: UCLA Downtown Labor Center. Google Scholar Search this bibliographic reference on Google Scholar
- Colodny, David, Aaron Halegua, Leah Lotto, Jenny Pelaez, Hollis Pfitsch, Christine Ricardo, and Amy Tai (2015) Empty Judgments: The Wage Collection Crisis in New York. New York: Community Development Project at the Urban Justice Center. Google Scholar Search this bibliographic reference on Google Scholar
- Cooper, David and Teresa Kroeger (2017) Employers Steal Billions From Workers’ Paychecks Each Year. Economic Policy Institute. https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year/ (March 28, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- DeYoung, Robert, W. Scott Frame, Dennis Glennon, and Peter Nigro (2010) “The Information Revolution and Small Business Lending: The Missing Evidence.” Journal of Financial Services Research 39: 19-33.10.1007/s10693-010-0087-2 Google Scholar Search this bibliographic reference on Google Scholar
- Dilger, Robert Jay (2016) Small Business Administration 7(a) Loan Guaranty Program. Congressional Research Service Report no. R41146. February 18, 2016. Google Scholar Search this bibliographic reference on Google Scholar
- Dilger, Robert Jay (2021) Small Business Size Standards: A Historical Analysis of Contemporary Issues. Congressional Research Service Report no. R40860. Updated April 2, 2021.Google Scholar Search this bibliographic reference on Google Scholar
- Duca, James (1998) “The Interaction Between Mechanic’s Lien Law and the Bankruptcy Code.” The Business Lawyer 53 (4): 1283-1314.Google Scholar Search this bibliographic reference on Google Scholar
- ERG (2014) The Social and Economic Effects of Wage Violations: Estimates from California and New York. Lexington, MA: Eastern Research Group. December. Google Scholar Search this bibliographic reference on Google Scholar
- Ertman, Martha and Doris Weil (2018) “Maryland’s New Remedy for Wage Theft.” Maryland Bar Journal. January, 2018: 16-22.Google Scholar Search this bibliographic reference on Google Scholar
- Farbenblum, Bassina, and Laurie Berg (2020) “International Students and Wage Theft in Australia.” SSRN Scholarly Paper ID 3663837. Rochester, NY: Social Science Research Network. 10.2139/ssrn.3663837 Google Scholar Search this bibliographic reference on Google Scholar
- FASA (2020) Lien and Bond Claims in the 50 States: 2020. Foundation of the American Subcontractors Association, Inc. https://www.keglerbrown.com/content/uploads/2019/10/Lien-Bond-Claims-in-the-50-States-2020.pdf (January 21, 2022). Google Scholar Search this bibliographic reference on Google Scholar
- Federal Reserve (nd). “What is the Prime Rate, and Does the Federal Reserve Set the Prime Rate?” Board of Governors of the Federal Reserve System website. https://www.federalreserve.gov/faqs/credit_12846.htm (January 21, 2022). Google Scholar Search this bibliographic reference on Google Scholar
- Fine, Janice (2011) “New Forms to Settle Old Scores: Updating the Worker Centre Story in the United States.” Relations Industrielles/Industrial Relations 66 (4): 604-630.10.7202/1007636ar
Google Scholar
Search this bibliographic reference on Google Scholar
- Fine, Janice and Jennifer Gordon (2010) “Strengthening Labor Standards Enforcement through Partnerships with Workers’ Organizations.” Politics & Society 38 (4): 552-585.10.1177/0032329210381240 Google Scholar Search this bibliographic reference on Google Scholar
- Fritz-Mauer, Matthew (2016) “Lofty Laws, Broken Promises: Wage Theft and the Degradation of Low-Wage Workers.” Employee Rights and Employment Policy Journal 20: 71-127. Google Scholar Search this bibliographic reference on Google Scholar
- Fuentes, Rey (2019) “Making Workers Whole: A Retrospective Analysis of SB588 and Enhanced Post-Judgment Collection in California.” Berkeley Journal of Employment & Labor Law 40 (2): 369-402. 10.2139/ssrn.3343931 Google Scholar Search this bibliographic reference on Google Scholar
- Galvin, Daniel (2021) “Labor’s Legacy: The Construction of Subnational Work Regulation.” ILR Review 74(5): 1103-1131.10.1177/0019793920943831 Google Scholar Search this bibliographic reference on Google Scholar
- GAO (1996) Small Business: A Comparison of SBA’s 7(a) Loans and Borrowers with Other Loans and Borrowers. United States General Accounting Office Report to the Committee on Small Business, US Senate. Report No. RCED-96-22.Google Scholar Search this bibliographic reference on Google Scholar
- Gleeson, Shannon (2015) “Brokered Pathways to Justice and Cracks in the Law: A Closer Look at the Claims-Making Experiences of Low-Wage Workers.” WorkingUSA: The Journal of Labor and Society 18: 77-102.10.1111/wusa.12154 Google Scholar Search this bibliographic reference on Google Scholar
- Glennon, Dennis and Peter Nigro (2005) “An Analysis of SBA Loan Defaults by Maturity Structure.” Journal of Financial Services Research 28 (1): 77-111.10.1007/s10693-005-4357-3 Google Scholar Search this bibliographic reference on Google Scholar
- Hallett, Nicole (2018) “The Problem of Wage Theft.” Yale Law & Policy Review 37 (1): 93-152.Google Scholar Search this bibliographic reference on Google Scholar
- Hancock, Diana and James Wilcox (1998) “The ‘Credit Crunch’ and the Availability of Credit to Small Business.” Journal of Banking and Finance 22: 983-1014.10.1016/S0378-4266(98)00040-5 Google Scholar Search this bibliographic reference on Google Scholar
- Heil, Mark (2019) “Missing the Cut? How Threshold Effects Distort U.S. Small Business Lending Trends.” Finance Research Letters 28: 82-86.10.1016/j.frl.2018.04.005 Google Scholar Search this bibliographic reference on Google Scholar
- Hollander, Michael (2015) “Finishing What You Started: Collecting on Judgments for Low-Wage Workers.” Clearinghouse Review 2015 (1): 1-8.Google Scholar Search this bibliographic reference on Google Scholar
- Jacobs, Ken, Ian Perry and Jenifer MacGillvary (2015) The High Public Cost of Low Wages. UC Berkeley Center for Labor Research and Education. April.Google Scholar Search this bibliographic reference on Google Scholar
- Judge, Lindsay, and Anna Stansbury (2020) “Under the Wage Floor.” Resolution Foundation. https://www.resolutionfoundation.org/publications/under-the-wage-floor/ (January 20, 2022).Google Scholar Search this bibliographic reference on Google Scholar
- Kelley, Gail (2013) Construction Law. Hoboken, NJ: John Wiley & Sons. Google Scholar Search this bibliographic reference on Google Scholar
- McCubbins, Matthew and Thomas Schwartz (1984) “Congressional Oversight Overlooked: Police Patrols Versus Fire Alarms.” American Journal of Political Science 28(1): 165-179.10.2307/2110792 Google Scholar Search this bibliographic reference on Google Scholar
- Meixell, Brady and Ross Eisenbrey (2014) Wage theft is a much bigger problem than other forms of theft – but workers remain mostly unprotected. Economic Policy Institute. September 18. https://www.epi.org/publication/wage-theft-bigger-problem-forms-theft-workers/ (March 28, 2021).Google Scholar Search this bibliographic reference on Google Scholar
- Mester, Loretta (1997) What’s the Point of Credit Scoring? Federal Reserve Bank of Philadelphia Business Review (September/October 1997): 3-16.Google Scholar Search this bibliographic reference on Google Scholar
- NELP (2011) Winning Wage Justice. New York: National Employment Law Project. January. Google Scholar Search this bibliographic reference on Google Scholar
- Nelson, Blake (2007) “Construction Liens: A National Review and Template for a Uniform Lien Act.” Mitchell Law Review 34 (1): 245-272.Google Scholar Search this bibliographic reference on Google Scholar
- NYSS (2019) Transcript, New York State Assembly Hearing, June 17 2019. Disclosed under Freedom of Information Law request by first author. Dated November 17, 2020.Google Scholar Search this bibliographic reference on Google Scholar
- NYSS (2020) “Senate Bill S2844B.” New York State Senate website. https://www.nysenate.gov/legislation/bills/2019/s2844/amendment/b (April 24, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- Reed, Amanda, Andrea Saylor and Margaret Spitzer (2015) Shortchanged: How Wage Theft Harms Pennsylvania’s Workers and Economy. Philadelphia: Stephen and Sandra Sheller Center for Social Justice, Temple University. June. Google Scholar Search this bibliographic reference on Google Scholar
- Ronconi, Lucas (2010) “Enforcement and Compliance with Labor Regulations in Argentina.” ILR Review 63(4): 719-736. 10.1177/001979391006300409 Google Scholar Search this bibliographic reference on Google Scholar
- SBA (nd) “Types of 7(a) Loans.” United States Small Business Administration website. https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans (April 24, 2021). Google Scholar Search this bibliographic reference on Google Scholar
- Shen, Wen, Christine Kao and Clare Pastore (2013) Combating Wage Theft in California Through Wage Liens. Report. Accessed by open records request to the California State Archives for AB1164. Google Scholar Search this bibliographic reference on Google Scholar
- Srivastav, Abhishek and Francesco Vallascas (2021) “Small Business Lending and Regulation for Small Banks.” Management Science pre-publication. 10.1287/mnsc.2021.4176 Google Scholar Search this bibliographic reference on Google Scholar
- Temkin, Kenneth and Brett Theodos (2008) An Analysis of the Factors Lenders Use to Ensure Their SBA Borrowers Meet the Credit Elsewhere Requirement. Urban Institute. January 2008. Google Scholar Search this bibliographic reference on Google Scholar
- Temkin, Kenneth, Brett Theodos, and Kerstin Gentsch (2008) Competitive and Special Competitive Opportunity Gap Analysis of the 7(a) and 504 Programs. Urban Institute. January 2008. Google Scholar Search this bibliographic reference on Google Scholar
- Underhill, Elsa and Malcolm Rimmer (2017) “Private Governance, State Regulation and Employment Standards: How Political Factors Shape Their Nexus in Australian Horticulture.” Relations Industrielles/Industrial Relations 72(1): 33-55.10.7202/1039589ar
Google Scholar
Search this bibliographic reference on Google Scholar
- Vosko, Leah, John Gruncy, Eric Ticker, Mark Thomas, Andrea Noack, Rebecca Casey, Mary Gellatly, and Jennifer Mussell (2017) “The Compliance Model of Employment Standards Enforcement: An Evidence-Based Assessment of its Efficacy in Instances of Wage Theft.” Industrial Relations Journal 48 (3), 256-273.10.1111/irj.12178 Google Scholar Search this bibliographic reference on Google Scholar
- Wage Justice Center (2018) “Success Stories.” http://wagejustice.org/success-stories/ (January 20, 2022).Google Scholar Search this bibliographic reference on Google Scholar
- Weil, David (2014) The Fissured Workplace. Cambridge, MA: Harvard University Press.10.4159/9780674726123 Google Scholar Search this bibliographic reference on Google Scholar
- Weil, David and Amanda Pyles (2006) “Why Complain? Complaints, Compliance, and the Problem of Enforcement in the U.S. Workplace.” Comparative Labor Law and Policy Journal 27: 59-92.Google Scholar Search this bibliographic reference on Google Scholar