Labor unions’ wage-hike head fake

Will these folks remain happy when they learn the unions want to negotiate their wages downward? (AP Photo / Damian Dovarganes)

Will these folks, cheering the Los Angeles City Council’s May 19 decision to raise the minimum wage, remain happy when they learn the unions want to renegotiate their new, higher wages back downward? (AP Photo / Damian Dovarganes)

You can say a lot of things about labor unions, but you can’t say they don’t understand economics — at least, when it’s convenient for them to do so.

Earlier this month, Los Angeles became the latest city to set its minimum wage on a course to rise to $15 an hour by 2020. Within this piece by the Los Angeles Times about the city council’s vote is a sentence that probably seemed obvious to the point of superfluousness at the time:

“During nearly a year of often emotional debate, labor leaders never gave ground on their central demand that the minimum wage rise to at least $15.”

The unions fought for that demand over an alternative proposal by Mayor Eric Garcetti for a target of only $13.25 by 2017. A former head of the Los Angeles County Federation of Labor — keep that organization’s name in your head — called the measure a matter of alleviating poverty.

Fast-forward eight days, and suddenly the unions were singing a different tune (again via the Los Angeles Times):

“Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces. …

“For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.

“But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“‘With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,’ Hicks said in a statement. ‘This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.'”

Let’s pause for just a moment to admire the sheer and unconstrained chutzpah of a union leader arguing for workers to have “freedom” to negotiate the terms of their employment — which is exactly what a labor union seeks to deny workers on an individual basis by imposing the terms of employment on all workers through collective bargaining. Note, too, the complete, brazen hypocrisy of Hicks’ arguing for a union exception after leading the coalition that had just sought the wage increase on a no-exceptions basis.

At Forbes, UGA economics professor Jeffrey Dorfman explains why the unions had such a quick change of heart (at least, in public; this second step of their campaign was no doubt planned long in advance). Noting a study last year by the nonpartisan Congressional Budget Office that found an increase in the national minimum wage to just $10 an hour would be likely to kill 500,000 American jobs, Dorfman writes:

“Simple logic suggests that a minimum wage of $15 per hour would reduce employment far more severely than one of $10. Yet, those pushing to ‘raise the wage’ consistently push reports claiming that increasing the minimum wage somehow does not cost jobs.

“However, unions asking for an exemption from Los Angeles’ higher minimum wage is a clear admission by the unions that they understand the basic principles of economics. They know such an absurdly elevated minimum wage would cause many workers to lose their jobs as employers cannot afford to keep workers who simply are not worth that much.

“To put $15 per hour into perspective, according to the National Center for Education Statistics, that is the median earnings for somebody with a high school degree but no college. That means half of high school graduates earn less than what Los Angeles is proposing for a minimum wage. How could such a wage floor not cost jobs?

“Actually, there is one way to avoid the large scale job losses sure to result from such a minimum wage increase and the unions have the answer. Because union workers could be paid a sub-minimum wage, employers who wish to avoid the $15 per hour minimum wage can encourage their workers to unionize. Then they can pay a lower wage (assumedly something higher than what the employer was paying, but lower than the non-union minimum wage). Workers get a smaller raise, but still a raise, and they get to keep their jobs (or at least most of them do; since wages are still likely to rise somewhat, employment will still drop by a smaller amount).”

In the end, the entire push by unions for a minimum-wage hike appears to be a ploy to add to their own numbers. Which, of course, means collecting dues from those new members to spend on union-boss salaries and political donations to Democratic politicians, who are only too happy to go along with farces such as the one that played out in Los Angeles.

It is a testament to the lack of appeal and usefulness of today’s labor unions that they cannot persuade workers to join them so they can bargain for higher wages and other benefits. Thus, unions resort to asking the government to mandate higher wages — and then relying on business owners to encourage their workers to unionize so the union can renegotiate the workers’ wages back downward. Instead, employers may be more likely to seek ways to automate some of the jobs from which workers will be priced out, cementing the job-killing effects of such a steep wage hike, of which the unions apparently knew all along.

The entire episode may set a new record, even among unions, for chutzpah and hypocrisy.

Reader Comments 0

55 comments
Visual_Cortex
Visual_Cortex

So you're not even mentioning the potential benefits package(s) that might be part of a negotiated deal that could include a lower-than-minimum starting wage, Kyle, save for conflating the two in the last sentence? Nor mentioning that said benefits could, conceivably, be worth a lot more than the hourly wage increase one might otherwise be mandated to receive?

Now, that's chutzpah.


Kyle_Wingfield
Kyle_Wingfield moderator

@Visual_Cortex First, you're assuming the hypothetical job necessarily is without benefits now and necessarily would have them under collective bargaining.

But in any case, one of the big flaws of the minimum wage is that it doesn't allow for such considerations and trade-offs. Nor would you have any recourse (in a non-RTW state, anyway) if you'd rather skip the insurance and receive the higher wage that prevails under the law because your spouse (or, more likely, parents) can provide you with insurance.

So it's not at all clear to me that, even if we make a bunch of assumptions about these scenarios which are favorable to the unions, the worker is necessarily better off.

Visual_Cortex
Visual_Cortex

@Kyle_Wingfield @Visual_Cortex

 First, you're assuming the hypothetical job necessarily is without benefits now and necessarily would have them under collective bargaining.

Pretty much, yeah. If that's not the case then I don't know why a union would bother to seek such an exemption.

In any case, I see that smaller LA businesses (<25 employees) get until 2021 to absorb these added costs. So there's another exemption, of sorts.


Kyle_Wingfield
Kyle_Wingfield moderator

@Visual_Cortex "Pretty much, yeah. If that's not the case then I don't know why a union would bother to seek such an exemption."

Did you read the post? The reason is so that the employer would encourage his/her workers to unionize and save money on the wages. In fact, if the point is that the employer could decrease wages and increase benefits by an equal or greater value, the union's sales pitch wouldn't really work, would it?

"In any case, I see that smaller LA businesses (<25 employees) get until 2021 to absorb these added costs. So there's another exemption, of sorts."

Yes, it's one whole year later than every other business must hit the target. Not much of an exception, that.

Lee_CPA2
Lee_CPA2

And the people in the photo cheering the decision to raise the min wage to $15 will never make the connection when they go to the grocery store and the price of that loaf of bread just went up 50 cents (or more).

Visual_Cortex
Visual_Cortex

@Lee_CPA2

the price of that loaf of bread just went up 50 cents

Not intended to be a factual statement.

Shar1
Shar1

How about linking the total executive/CEO  compensation to a factor of the lowest-paid third of the company's workforce for any business that uses federal services or gets tax breaks?  Then there is no set minimum wage but executives cannot get inflated compensation without indeed raising all boats.

LilBarryBailout
LilBarryBailout

Just another bright shining example of liberal fascism.

"Do it our way or lose your freedom".

In this case, the freedom to negotiate the terms of your labor.


IReportYouWhine#1
IReportYouWhine#1

I know how to raise the minimum wage, quit importing millions of low wage foreign workers and let AmeRicans set their own wage rates.


Plain and simple fact.

Visual_Cortex
Visual_Cortex

@IReportYouWhine#1

Pull up the drawbridges and hope that our moat keeps Those People out. What could go wrong?

stogiefogey
stogiefogey

At the end of the day the laws of economics will dictate whether a $15 (or smaller) minimum wage is viable. If a McD's franchisee has to raise the price of a Big Mac to cover the higher wage and his customers can get their junk food fix at a better price elsewhere he'll eventually go out of business. That simple. 

$15 might work in CA, doubt very much it'd work in GA.

Hedley_Lammar
Hedley_Lammar

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.


Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour - before tips. Even with a recent increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace the U.S. average in 2014.


Myth: Increasing the minimum wage will cause people to lose their jobs

.

Not true: A review of 64 studies on minimum wage increases found no discernable effect on employment. Additionally, more than 600 economists, seven of them Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016.


http://www.dol.gov/minwage/mythbuster.htm

Hedley_Lammar
Hedley_Lammar

Question for those who disagree with raising the minimum wage


Do you think there should be a minimum wage at all ?


If so what is that number ? In your opinion is the current minimum too high ?

Hedley_Lammar
Hedley_Lammar

@Kyle_Wingfield By that logic if we just lower it to 2 dollars everyone will have a job


YEAH !!!!


We are now China


Lets eliminate pesky child labor laws while we are at it.  Those kids need to learn to pull themselves up by their bootstraps right ?

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar We are talking about roughly 2.2% of all workers in this country who are paid at or below the federal minimum wage. When you cut it down to minimum-wage earners who are at least 25 years old, it is down to about 1.5%.

Data here: http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf (Note that most of the distribution stats cover only hourly workers, who make up 58.7% of all workers.)

I'd say that 1.5% figure represents an exception to the rule that people earn the minimum wage in entry-level jobs and then move on.

And I see you're still ignoring the EITC.

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar And by your logic, if we just raise it to $100/hour, everyone will be rich!

The minimum wage is intended to apply to entry-level jobs. You aren't supposed to make a career of those kinds of jobs. And the vast majority of Americans don't. Those who do earn the minimum wage also typically qualify for the Earned Income Tax Credit, a fact you usually leave out of your little morality lectures.

Hedley_Lammar
Hedley_Lammar

@Kyle_Wingfield @HeadleyLamar The minimum wage is intended to apply to entry-level jobs.


But they dont.


And when the minimum wage is raised EVERYONE'S wages go up. 


 "a rising tide lifts all boats"


A fact that is also conveniently left out. 

MHSmith
MHSmith

@Kyle_Wingfield @HeadleyLamar


Since you brought the EITC up Kyle, it might not hurt to remind the lib proggies once again under what President that "SOCIAL INCOME EQUITY"program was passed and signed into law.


By the way, I'm glad government minimum wage law can be overridden in the marketplace by the demands of labor shortages: Which produce greater increases in wages than union extortions and fascist legislation. 

LogicalDude
LogicalDude

How about an "equivalent pay" of $15/hour? 

Companies with unions can pay less, but "union benefits" can push that back up to $15/hr. Companies with health insurance coverage can have workers voluntarily sign up and get benefits. Sure, someone with benefits could be paid $14/hour + benefits, while another gets paid $15/hour with no benefits. 


The whole point is that the national minimum wage has not increased in years, and the lowest workers have been falling behind as inflation puts stagnant budgets against higher priced food, housing, gas, and utilities.


The best solution is to line up the minimum wage with inflation (after it's set to match a pre-determined value of what the minimum wage should cover- so after $15 in 2020, it should be near the median of minimum wage versus buying power.)  


Jefferson1776
Jefferson1776

Why are labor unions considered bad to the GOP but political unions like the GOP are good ?



MissDaisyCook
MissDaisyCook

The Government should not be a party to an employment contract.  What an employee is paid should be negotiated between the employer and the employee.  If an employer is not paying you what your worth, you go somewhere else.  Your not a slave to Wal-Mart and can just get on down the road to a better paying job; if your worth it.  Your only paid what your worth.  If you want higher wages, you make yourself more attractive to employers through education, experience, work-ethic. 

Hedley_Lammar
Hedley_Lammar

@MissDaisyCook What an employee is paid should be negotiated between the employer and the employee. 


Correct. And they should also be allowed to organize and bargain collectively. 


If an employer is not paying you what your worth, you go somewhere else.  Your not a slave to Wal-Mart and can just get on down the road to a better paying job


That maybe true on Lollipop Lane in Fantasyland but in the real world we live in people don't always have that choice

MarkVV
MarkVV

@MissDaisyCook 

“Your not a slave to Wal-Mart and can just get on down the road to a better paying job; if your worth it.”

This is a false, callous argument, similar to the one made by Kyle regarding paid leave. It ignores places like a small town with one major employer, and people who lived there for generations and worked for that company. Yes, they could tear their families away and try their luck elsewhere; would you?

RafeHollister
RafeHollister

@MissDaisyCook Miss Daisy is spot on, good attitude, willingness to work hard and not complain, eager to learn new skills, will usually move you up the salary ladder.  Those that take the attitude that they aren't getting paid enough to put forth any more effort than they already are and constantly complain about their lot, while doing nothing to improve it, tend to find raises harder to obtain, than their peers do.  

Hedley_Lammar
Hedley_Lammar

@RafeHollister @MarkVV @MissDaisyCook  If you are not willing to help yourself then accept your situation and don't complain and bad mouth the employer.


Let them eat cake.


You are right I guess. People should accept the few pennies they are paid for their labors and just shut up about it


Forgot about benefits too. 


A callous argument is that everyone deserves a certain salary regardless of attitude, skills, absences, or poor performance.


No one is suggesting an egalitarian salary system. Let just raise the floor a bit shall we ?

MarkVV
MarkVV

@RafeHollister @MarkVV @MissDaisyCook  A ridiculous statement is claiming that  someone made an argument that everyone deserved a certain salary regardless of attitude, skills, absences, or poor performance.

Hedley_Lammar
Hedley_Lammar

@RafeHollister @MissDaisyCook This is the let them eat cake argument that just isnt going to fly. 


Poor people already DO work hard. Often at several jobs.


Thier "effort" isn't the issue.

RafeHollister
RafeHollister

@MarkVV @MissDaisyCook If you are not willing to help yourself then accept your situation and don't complain and bad mouth the employer.  Many of us left small town America because we weren't willing to accept the employment opportunities there, it is a choice.  Many stay and learn to live on what they make and really enjoy the small town atmosphere, despite the loss of salary opportunities.  It is just a trade off more employment opportunities/higher salary or contentment of living a slower more family based life.  


A callous argument is that everyone deserves a certain salary regardless of attitude, skills, absences, or poor performance.


MarkVV
MarkVV

What is not a new record of chutzpah and hypocrisy, but another example in a long series, is when the conservatives and Republicans attack the President because income inequality has not improved during his tenure, and then fight any efforts to increase the lower scale wages.

The union leaders can and will defend their suggestion about an exception to a mandated minimum wage. For instance they may argue that what they negotiate with each employer is total compensation, which includes various benefits, which are specific to that company and site, but which could not be mandated nationally.

The incessant whining about the effect of higher minimum wages on employment is usually based on simplistic arguments, which do not withstand a scrutiny: The employer cannot afford to pay more to his employees, so he (generic pronoun) has to reduce their number. Really? So you have an employer, who sells services or produces something, and he needs X employees for that. When he is forced to pay each of them more, he fires a few to do – what? Offer fewer services? Reduce the output? What is ignored is that a) there is profit made and the employer gets his share; b) there are prices of the services and products involved; c) the mandate affects the competing employers as well. Apparently for conservatives, the notion that the high earners might get their share reduced is out-of-the-question – unless they talk about President Obama and his “responsibility” for income inequality.

MHSmith
MHSmith

A fifteen dollar per hour minimum wage is best thing that could ever happen to correct the American diet in attempts to curb obesity and mortality.



Kyle_Wingfield
Kyle_Wingfield moderator

@Jefferson1776 In his hypothetical, I meant.

My guess is the real effect would be to simply speed up the move to automation.

Kyle_Wingfield
Kyle_Wingfield moderator

@MHSmith I'm guessing that's because it would put fast-food joints out of business ...

MHSmith
MHSmith

@Kyle_Wingfield @MHSmith


Golly Kyle, it wasn't too much of a guess, was it? LOL!


Look at it on the up side, it will cut the numbers of coronaries, diabetes and cancer cases we pay to treat.    



Hedley_Lammar
Hedley_Lammar

Noting a study last year by the nonpartisan Congressional Budget Office that found an increase in the national minimum wage to just $10 an hour would be likely to kill 500,000 American jobs,


Yet we know in practice, not a study,  that its just not the case.


Today, the most rigorous research shows little evidence of job reductions from a higher minimum wage. Indicative is a 2013 survey by the University of Chicago’s Booth School of Business in which leading economists agreed by a nearly 4 to 1 margin that the benefits of raising and indexing the minimum wage outweigh the costs.


http://www.raisetheminimumwage.com/pages/job-loss


Areas that have raised the min wage have not seen increases in unemployment


But by all means lets continue to let Wal Mart pays its employees 9 bucks an hour so they are all on food stamps and us taxpayers get stuck with the bill


Meanwhile the Walton family owns more wealth than 40 percent of America


And they earned it the old fashioned Republicans way. They sat on their backsides and inherited it. 







Rxdawg03
Rxdawg03

@HeadleyLamar I'll say this, you picked an appropriate call sign for yourself.  Anybody who touts the "benefits" that the union will negotiate for forget that most jobs in the US are now mandated to provide the biggest benefit they negotiate for to all workers via the AFCA, and as has been previously mentioned, the vast majority of these jobs are entry level as has already been pointed out by BOL statistics.  Pretty sure those "benefits" won't be transferrable, so they amount to simply lost income opportunity.  The poster who argued for indexing minimum wage is probably the best concept, but Democrats are more interested in out-pacing it.  After all, that's the Democratic way....Can't earn it yourself?  Get somebody to legislate it to you!

RafeHollister
RafeHollister

If the automated burger serving robots take all the jobs, the displaced workers can turn on the mind numbed robots incessantly chanting to raise the minimum wage.  Robot wars ahead!


I am guessing that the proggie advocates for wage controls, are willfully ignorant of what has happened in Seattle since the $15 raise legislation.    The carbon footprint of eating out may increase greatly, as folks have to drive outside the city to find a restaurant.

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar And the belief that government can suspend the laws of economics is what we might call your worldview.

Hedley_Lammar
Hedley_Lammar

@Kyle_Wingfield @HeadleyLamar That would be something if true.


But the simple fact is raising the minimum wage does not lead to the doom and gloom you guys portray. 


Conservatives have long portrayed minimum-wage increases as a harbingers of economic doom, but their fears simply haven't played out. San Francisco, Santa Fe, and Washington, DC, were among the first major cities to raise their minimum wages to substantially above state and national averages. The Center for Economic and Policy Research found that the increases had little effect on employment rates in traditionally low-wage sectors of their economies:


http://www.motherjones.com/kevin-drum/2015/04/economic-collapse-prediction-minimum-wage-raise

Sorry those are just the facts. 

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar We haven't seen increases as sharp as these before -- which, let's point out, haven't taken full effect yet. In most cases, the wage has gone up only slightly. We won't know the effect of a move to $15/hour until the wage has actually hit $15/hour. But I wouldn't bet on productivity gains in the meantime that justify that kind of pay in the kinds of jobs we're taking about.