My state of California just joined the League
of Benevolence by increasing the minimum wage all employers must pay their
employees. Titled the “Fair Wage Act of
2016,” the rate will periodically rise over the next five years from the
current $10 to $15 per hour—a fifty percent increase. The asserted justification
for the increase is one of fairness and humanity. As one of its sponsors, Georgette Bradford, a
member of Service Employees International Union (SEIU), said: “Low wages keep
people trapped in a cycle of poverty . . . it is becoming harder and harder to
survive in what is considered the richest state of our nation. Our initiative intends to change all of
that.”
Understandably, the increase is not without
its critics. Most controversial is the
claim, somewhat substantiated, that instead of a wage increase, minimum wage
employees will more often simply find themselves out of a job. Nonetheless, the intense political pressure
which propelled the legislation overrode all objections.
I pose a question: Why was SEIU one of the
law’s principal sponsors? It’s
questionable whether a single union employee in the state earns less than $15
per hour. Can it be the union is merely
engaged in an humanitarian effort? I
think not; the real reason is far more pragmatic. Ever since passage of the Fair Labor
Standards Act of 1938, during the Franklin Roosevelt administration, union
contracts in force throughout the nation increasingly contain provisions tying
salaries to some multiple of the established minimum wage. I’m advised, as an example, a California
schoolteacher’s starting pay is set at double the minimum wage. And inasmuch as few SEIU employees risk
losing their jobs, the fact the wage of a destitute non-union worker may drop
from $10 per hour to zero is a matter of little concern to anyone.
While we’re at it, there’s yet another
benefit, in that union dues are normally set at a percentage of an employee’s
pay. Thus, as the minimum wage rises, so
does the remuneration to the union hierarchy.
Three cheers for humanitarianism!
A final word: Neither business nor organized
labor is a charitable endeavor.
Generally, payers want to minimize their payments, while recipients
strive to maximize their income. This is
the normal state of affairs, with human nature in agreement.
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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity
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