Economics in Brief: Forced Arbitration Enables Billions in Wage Theft Each Year
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Economics in Brief: Forced Arbitration Enables Billions in Wage Theft Each Year

And in other economics news this week, Congress debates whether banks should report diversity data, and gentrification claims another victim in D.C.

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Forced Arbitration Enables Billions in Wage Theft Each Year

A growing trend of “forced arbitration” is costing employees billions of dollars a year, a brief from the National Employment Law Project says.

The Washington Post, reporting on the brief, explains how it works. Traditionally, when an employee is denied overtime, forced to work off the clock or not paid minimum wage, she can sue. But employers who insist on forced-arbitration clauses in their employment contracts can require that employees resolve any disputes through mediation, which is far friendlier to employers than employees.

Data from Cornell University shows that employees win their mediation claims far less frequently than they do in court. In federal court, employees win 36.4 percent of the time, in state courts, 51 percent of the time. In mediation, employees win their cases only about 21 percent of the time — and when they do, they receive much less in damages ($36,500 under arbitration compared to $176,000 in federal and $86,000 in state courts).

The National Employment Law Project used those numbers to extrapolate that forced-arbitration clauses cost low-wage workers about $12.6 billion in stolen wages a year. The group estimates that 55 percent of private-sector, non-union employees are subject to forced arbitration, and that number is expected to rise.

Should Banks Report Diversity Data? U.S. House Dems Say Yes

Democratic members of the U.S. House Financial Services Committee say that banks should share data on their internal diversity with regulators and the public in order to “hold them accountable for real and intentional diversity and inclusion outcomes,” American Banker reports.

Predictably, Republicans on the committee said it “wouldn’t be appropriate” for the government to mandate diversity reporting.

The debate was sparked over a new committee report on diversity at the country’s largest banks, where women hold only 29 percent of senior and executive positions, and racial and ethnic minorities make up only 19 percent of the senior-level workforce.

“What we have learned is that discrimination and other kinds of reasons have caused a lack of opportunity for talented people who would like to be in the financial services space,” House Financial Services Committee Chairwoman Maxine Waters, D-Calif., said at the hearing. “We intend to do everything that we can for transparency in all of the industries.”

“It’s encouraging to see that large banks and financial institutions, they are really taking this mission more seriously,” said Rep. Ted Budd, R-N.C. “However, I am concerned that we can’t see the forest through the trees here and that we are starting to mandate the private sector of one particular industry to self-report and it may not meaningfully lead to a more diverse and inclusive workforce. … It seems like the financial services industry is making progress without government intervention.”

Gentrification Claims Another Victim in Washington, DC

Gentrification in Washington, D.C.’s H Street Corridor is causing longtime carryout Horace and Dickie’s to close, the owners told DCist this week.

The rapid development along the corridor has made the building where Horace and Dickie’s opened 30 years ago much more valuable, DCist reports, and Richard “Dickie” Shannon told WJLA that the building’s landlord wants the space for another use.

A 2019 study by the National Community Reinvestment Coalition (NCRC) found that D.C. has experienced the most intense level of gentrification of any U.S. city, WUSA reports. Forty percent of D.C.’s census tracts eligible for gentrification were determined to have gentrified from 2000 to 2013, and 53 percent of residents in those tracts had been displaced, the NCRC study found.

EDITOR’S NOTE: We’ve corrected the final item in this roundup to clarify that gentrification occured in 40 percent of what NCRC defined as a neighborhood “eligible” for gentrification — one with a median household income and median home price below the 40th percentile in the region.

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.

Tags: washington dcgentrificationbankslabordiversity and inclusion

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