Exploring the link between foreign investment and domestic wage theft

Wage theft, or the deprivation of legally mandated wages by an employer (Bobo, 2012), continues to be a pervasive issue within today’s workforce (Bernhardt et al., 2013; McNicholas et al., 2017; Weil, 2014). An emerging literature has attempted to estimate the incidence of wage theft in the U.S. and explain its prevalence (e.g., Bernhardt et al., 2009; Bernhardt et al., 2013; Ji & Weil, 2015). While scholars acknowledge the potential link between foreign investment and domestic wage theft (Bobo, 2012; Weil, 2014) and globalization has been linked empirically to individual perceptions of economic insecurity (Scheve & Slaughter, 2004) and domestic wage inequality (Keller & Olney, 2017), the relationship between foreign direct investment (FDI) by U.S. multinationals and domestic wage theft violations has yet to be empirically tested. Using 2009-16 data from the U.S. Bureau of Economic Analysis (BEA) and Current Population Survey Merged Outgoing Rotation Groups (CPS-MORG), this study uses a series of random-intercept logistic regression models to test the relationship between industry level of outward foreign direct investment (FDI) and minimum wage violation rates. The results provide support for the negative relationship between industry level of outward FDI by U.S. multinationals and minimum wage violation rates across service industries; no significant relationship is found between outward FDI and minimum wage theft in goods-producing industries. Considerations for future research are discussed.M.S.Includes bibliographical reference