Subsidized By Taxpayers, Stealing From Workers

Wage thieves should get no public favors.

Photo credit: Dave O

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The U.S. Department of Labor earlier this month found that Seaboard Triumph Foods, a pork processor in Sioux City, Iowa, illegally stole wages from workers by not paying them for work done before and after their official shifts, including time for “set up, clean up and knife sharpening.” Seaboard was ordered to pay more than $331,000 in back pay to the affected workers.

Wage theft is a serious issue, with the Economic Policy Institute finding that between 2017 and 2020, state and federal agencies and private actors recovered more than $3.2 billion that had been stolen from workers — which means the actual total is far higher, since enforcement actions lag the actual theft and a lot of wage theft surely never gets prosecuted.

But in the case of Seaboard Triumph Foods, the issue is compounded by the fact that taxpayers were subsidizing the company, meaning the public put money into one of Seaboard’s hands as it was stealing from workers with the other.

Seaboard received a few tax break packages from the Iowa Economic Development Agency (IEDA) for this particular plant, including one last year for more than $6 million, and received local subsidies too, taking its total to somewhere between $20 million and $30 million. (And an executive vice president for Seaboard admitted that the incentives weren’t what drove the location decision for the plant, but be that as it may.)

The IEDA said it won’t try to recoup any of that money following the wage theft case, saying its not an enforcement or regulatory agency. Which is true — there’s probably no legal standing the agency could point to, since economic development agreements tend not to include clauses that allow for clawing back money if the corporation that received it is found to have been harming workers, or the environment, or doing much of anything else outside the strict parameters of the job creation and investment pledges it made.

But agreements could include those provisions! As Greg LeRoy from Good Jobs First told the Des Moines Register, “Conditioning incentives on things like not endangering workers and not stealing wages is a reasonable logical leap if you are incentivizing companies.”

Indeed, a quick look at the corporations that have been dinged for wage and hour violations recently — which is the catch-all term for labor law violations having to do with hourly pay and scheduling — also includes many corporations that are heavily into the corporate subsidy game: Walmart, FedEx, Intel, Amazon, and on and on.

States and localities could certainly make subsidy payouts contingent on avoiding successful prosecution for wage theft, and deny contracts to serial wage thieves altogether, if they’re going to insist on using economic development subsidies. After all, if one of the main goals of those subsidies is to create jobs (and it’s quite dubious that subsidies do actually create jobs, but let’s leave that aside), the literal least that elected officials can do is make sure those jobs don’t come with a side of wage theft from unscrupulous employers.

There’s also another angle to the Seaboard story, having to do with corporate consolidation. The meat processing industry is wildly consolidated, which gives employers more power over workers, as those workers have few options available if they want to leave an abusive employers for one with fewer problems. This is in many ways similar to the problems farmers face when trying to sell their wares: Fewer purchasers means those that remain can dictate prices and contractual conditions.

Labor law is part of the solution, of course, but so is antitrust law, as ensuring that markets for workers stay competitive will tamp down on the ability of certain corporations to harm workers.

As my colleague and Iowa State House candidate J.D. Scholten, who is from Sioux City, said, “This is yet another example of the problem of economic concentration in meatpacking plants. When there are just a few multinational corporations controlling the majority of the market share, they squeeze farmers, jack up the prices for consumers and, here, they exploit workers. We need to start enforcing our antitrust laws!"

As I wrote about last week, workers in more concentrated markets experience more labor law violations — and surely some percentage of those are going unpunished, so the problem is probably worse than we think — in addition to seeing more general wage cuts. By pairing vigorous labor law enforcement with antitrust reform and and end to corporate subsidies, states and localities can begin to break the hold corporations have over local labor markets and ensure that workers are paid a fair wage for a fair day’s work. And they’ll stop paying corporations to build the power they use to steal from workers. Wins all around, except for the wage scofflaws.

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SHAMELESS SELF-PROMOTION: My shop, the American Economic Liberties Project, along with a bunch of great New York partners put out a report on the most egregious corporate subsidy deals in the Empire State. You can read it here.

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UPDATE: There’s no confirmation yet from state officials, but it seems as if the mystery Kansas $1.3 billion deal I wrote about a few weeks ago could be for a Panasonic electric vehicle battery factory. If the reporting on this turns out to be correct, it would be by far the largest state subsidy Panasonic has ever received in the U.S.

And while we’re on the subject, here’s a good op-ed by Michael Farren on what Kansas could be doing instead of furthering the subsidy race to the bottom.

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— Pat Garofalo