Government Procurement and Wage Theft

Abstract

Wage theft is the largest form of theft committed in the U.S. Typical violations related to wage theft include the lack of payment for overtime hours or forcing employees to underreport hours worked. We find that government contracting has an important effect on firm employees as it reduces wage theft. The reduction in wage theft is due to improvements in reporting and monitoring. Firms with government contracts have less restatements and the effect is stronger for contracts that are subject to increased government oversight. Finally, in order to mitigate endogeneity concerns we perform differences-in-differences identification tests based on first time contractors and the Obama Administration government contracting reform. This study contributes to extant literature examining the consequences of government contracting.