Research Highlights Featured Chart

March 18, 2024

Debt collection

How prevalent is wage garnishment in the United States?

Tyler Smith

Source: Andrii_Z

Roughly a third of US consumers are behind on their debt payments, according to credit report data. With such a high rate of delinquency, creditors employ many methods to try to recover the money owed to them, ranging from simply contacting the debtor to more extreme measures, such as garnishing wages.

Recouping money directly from a worker's wages can have important consequences for the individual and for the labor market. However, the true prevalence and impact of wage garnishment is not fully understood by economists.

In a paper in the American Economic Review: Insights, authors Anthony A. DeFusco, Brandon Enriquez, and Maggie Yellen lay out some key facts about wage garnishment in the United States. They find that in 2019, roughly 1 in every 100 workers had wages withheld for defaulted debts.

The authors’ findings come from analyzing 2014–2019 data from the largest payroll processor in the United States—Automatic Data Processing Inc. (ADP)—which distributes paychecks to nearly a fifth of private-sector workers.

Figure 1 from the authors’ paper shows how the prevalence and incidence of wage garnishment has evolved in recent years.

Figure 1 from DeFusco et al. (2024)

In both panels, the x-axis indicates the months from January 2014 to January 2020. In Panel A, the y-axis indicates the percent of workers with garnished wages, and in Panel B, it indicates the percent of workers with newly garnished wages. 

In Panel A, the orange line shows that just under 0.8 percent of workers were being garnished in 2014, but that number increased to just over 1.1 percent by the end of 2019. The dark-blue series shows that debts owed to private creditors, such as credit card debts and medical debts, account for the bulk of garnishment. However, the sharper rise in the light-blue series since 2017 illustrates that student debts account for most of the recent overall increase in garnishments. 

In Panel B, the orange line shows that the percent of workers newly entering garnishment each month increased from an average of 0.14 percent at the start of the sample to 0.18 percent at the end. The panel also shows that the percentage increase in new garnishments was substantially larger for student loans. 

The authors’ work establishes crucial new facts about wage garnishment in the United States and provides a starting point for understanding its wider economic impact.