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Minimum wages and union hypocrisy

From the Wall Street Journal (behind a paywall);

“There are many ways to look at the minimum wage increase in Los Angeles from the current $9 an hour [under California law] to $15 by 2020—some hopeful, some cautionary, all good,” the New York Timeseditorialized last week.

The reader who alerted us to this editorial was incredulous: “ ‘All good’?! There are no downsides to a 67% increase in the minimum wage, according to the Times? Does the Times editorial board really believe this?”

Apparently not.... 

But the editorial’s biggest howler is that workers would be protected from job loss by “higher labor productivity.” That means less work is needed to produce the same output—which translates into either fewer workers or fewer hours for the same number of workers. If an employee with a machine produces as much as two employees used to, that means labor productivity has doubled. It also means one job has been obviated. Labor unions insist on burdensome work rules because the inefficiencies they impose force employers to keep more union members on the payroll than they otherwise would need to.

And speaking of unions, this report from the Los Angeles Times gives the lie to the entire minimum-wage argument:

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. . . .

[The delightfully named] 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.”

Freedom of contract is a good thing—who’d have thunk it? From the standpoint of the unions’ institutional interests, it’s an even better thing to have a monopoly on freedom of contract. The Hicks proposal would give some employers an incentive to yield to unionization efforts in exchange for discounted wages (from which employees would have union dues deducted).

Implicit in the Hicks argument is an acknowledgment that a higher statutory minimum wage is detrimental to the interests of some workers. Those whose competitive advantage is their willingness to work for less are likelier to find themselves unemployable—and, as even the Times acknowledges, having to scrape by amid a higher cost of living.

The Times once understood that. In January 1987 the paper published an editorial titled “The Right Minimum Wage: $0.00”:

Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour. But there’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market. . . .

An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers’ incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired. . . ."

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Reader Comments (1)

This is really very nice blog and so informative

Happy Fathers Day 2017 Images

June 1, 2017 | Unregistered CommenterALEX

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