Sarah McVay has been aware of racial inequality in the workplace since she was a teenager working at a fast food chain in Oregon. Now she has the data to back up what she observed there: that her non-white coworker was routinely handed the tasks nobody else wanted.

New research co-authored by McVay, a professor of accounting at the Foster School of Business, shows that worksites with a higher share of non-white frontline workers are more likely to have detected labor violations. Those violations climb when companies are scrambling to hit Wall Street’s earnings targets.

The paper, “Capital Market Pressure and Racial Inequality in Labor Violations,” co-authored with Seth Carnahan and MaryJane Rabier of Washington University in St. Louis, has been conditionally accepted by The Accounting Review.

McVay was working with Rabier on another paper when Carnahan, a strategy scholar who works extensively with Census data, pointed them toward a way to estimate the racial composition of frontline workers using Census-block data. The data gave the team a way to examine, at scale, a workplace dynamic McVay had seen firsthand.

Looking inside the same company

It is already well known that non-white workers are overrepresented in lower-wage, higher-risk jobs. That matters, but it also creates a challenge for researchers: If non-white workers experience more injuries or wage theft, is that because of race, or because they are concentrated in more dangerous and vulnerable jobs?

McVay and her co-authors wanted to get closer to the answer. To find out whether race mattered beyond the kinds of jobs workers held, they compared locations within the same company.

“You take the same two jobs, and one of them you’re white and one of them you’re non-white, and your experience is different,” McVay says.

The researchers compared stores, plants, warehouses, and other worksites within the same parent company, state, industry, and year. They linked Department of Labor data on safety violations and wage theft to Census-block data showing the racial composition of employees.

When Wall Street pressure reaches the front line

The researchers found a clear pattern. Within the same parent company, locations with more non-white frontline workers were more likely to have a detected safety violation or wage theft.

The pattern became much stronger when companies were under pressure to hit Wall Street’s expectations. In those moments, companies may look for quick ways to raise productivity or reduce costs.

“Sometimes a manager just says to workers, ‘Hey, you need to meet the productivity targets, no matter what it takes,’” McVay says. “‘Or, you need to work on that unsafe piece of equipment, and I know it’s been offline because it’s unsafe, but we need to bring it online.’”

That kind of message can land differently depending on who hears it. For someone who needs every shift to survive financially, a request to work at unsafe speeds, stay late, or use unsafe equipment may not feel like a request at all. It could feel like an order you can’t refuse.

The data reflected that dynamic. In those earnings-pressure years, the effect grew as the share of non-white frontline workers increased: Until worksites have at least 25% non-white frontline workers, there isn’t an increase in the risk of a safety violation or wage theft. At worksites where 25% of frontline workers were non-white, the likelihood of a detected violation or wage theft was 18% higher than the baseline. At worksites where 60% were non-white, it was 54% higher.

McVay says the pattern makes intuitive sense. If only one worker in a location is vulnerable, a manager may not be able to shift enough pressure onto that person to change the location’s performance. But when a larger share of the workforce has less power to push back, the pressure can be spread across a group.

“When you’ve got 25% of the establishment, now you’ve got enough,” McVay says. “And when you’ve got 60%, you see it actually shoots way up.”

The skeptics made the paper stronger

For McVay, the pattern made sense. She had seen how power worked in a low-wage workplace. Many of the people she presented the results to shared that understanding. But not everyone was ready to accept the research findings.

Some skeptics said this kind of thing couldn’t be happening because it was “illegal.” Others argued that the pattern had to be driven by something other than race itself. They pointed to geography, job type, local conditions, or worker behavior.

The hardest challenge came from a reviewer who pushed the authors to provide evidence that racial discrimination itself was at work.

McVay was not sure they would be able to show it. She assumed it would be hard to detect in the data, she says, because racial discrimination is illegal and often unintentional.

“I had thought for a long time we were going to have to be like, ‘Hey, we just can’t show this,’” she says.

Instead, the team spent roughly a year digging deeper, running three additional tests to see whether the connection between race and violations grew stronger in settings with more potential for racial discrimination.

One test looked at company history: Worksites with more non-white frontline workers were more likely to have violations at firms with a recent history of racial discrimination complaints or settlements.

Another focused on anti-Black bias: Using an existing measure of racial resentment toward Black Americans, the researchers found that worksites with more Black frontline workers were more likely to have violations in counties with higher racial resentment.

A third test looked at who managed the worksite. The test found that, in locations with more non-white workers, the number of violations was lower when there were also more non-white managers. In particular, it found that, at worksites with proportionally more Black managers, violations dropped by roughly 30% for Black frontline workers.

For McVay, the biggest surprise was not that workplace racial inequality existed, but that the team could show evidence of racial discrimination in the data.
“The idea of being able to statistically show racial discrimination,” she says. “Anecdotally, easy. But statistics…”

The paper does not claim to read any individual manager’s mind. But it does provide evidence that racial discrimination is not just background context. It helps explain which workers bear the burden of unsafe work and stolen wages.

What leaders need to see

The paper does not argue that executives are explicitly telling managers to violate labor laws. The mechanism can be subtler.

Executives set targets. Local managers decide how to meet them. Frontline workers may absorb the consequences, which can include serious injuries and substantial wage loss.

That pressure is especially visible when workers are deciding whether to challenge unsafe conditions or missing pay.

“There are two groups of employees,” McVay says. “One, they just don’t know the rules. And the other, they absolutely know the rules, but they just have to suck it up because they need their jobs and can’t risk refusing or speaking out.”

For boards and executives, the lesson is to pay attention not only to whether financial targets are met, but how they are met: how local leaders get their results. A company may celebrate hitting an earnings benchmark without recognizing that the cost was pushed onto frontline employees through unpaid time or increased injury risk.

McVay is especially concerned that fines assessed on companies may not be strong enough to deter violations, because the fines are much smaller than the potential profit.

“It’s profit maximizing,” she says. “Companies just don’t fix an issue, or they ignore it, because it’s actually easier and cheaper for them to pay the fine.”

Teaching accountability in the classroom

McVay brings the same lesson into her sustainability reporting course at Foster [Business Sustainability Reporting & Analysis ACCTG 490/ACCTG 590], where students are preparing for the kinds of management, executive, and board roles that shape those decisions. In the course, students learn to look beyond traditional financial statements and consider how companies affect workers, communities, and society.

Foster students look up real corporate violations, including what penalties were initially assessed and what companies ultimately paid. The exercise makes the issue concrete: A safety violation or wage-theft case is not just an abstract compliance problem. It is a business decision with consequences for real workers. And in some cases, the consequences can be deadly.

A firm’s financial performance may look strong on paper. But if earnings are achieved by pushing risk onto the workers least able to resist, the numbers are telling only part of the story. It’s the same instinct that drove the whole project for McVay: Turn what she’d witnessed firsthand into something undeniable in the data.

“This is true racial inequality,” she says. “It is real, and it exists, and it is happening every day.”

Sarah McVay is a professor of accounting at the Foster School of Business at the University of Washington Foster School of Business. She holds the Glen & Lucille Legoe Professorship. McVay teaches in Foster’s undergraduate, MBA, and Master of Professional Accounting programs.

This research was supported by a grant from the Foster School of Business Consulting and Business Development Center (CBDC), which supports academic research on entrepreneurship in under-resourced communities.