The consensus on Los Angeles’s trade unions asking for exemptions from the city’s big increase in its minimum wage that I remarked on earlier appears to be that the unions are acting their own interests rather than workers’ and venally so. Here’s a representative article:
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).
The other advantage of this arrangement is that the unions collect dues from all these new members. This is not a trivial matter, and unions appear to following a widespread strategy of pushing for higher local minimum wages and then getting an exemption for union members. As Diana Furchtgott-Roth reported, cities including San Francisco, Chicago, Milwaukee, and San Jose along with both the Los Angeles and Seattle-Tacoma airports have minimum wage laws which explicitly exempt union members.
I think that the unions should definitely not get their exemptions for the very reasons their leaders articulated so ardently when arguing in favor of the increase. And we should all keep on eye on Los Angeles’s experiment.
If Los Angeles’s economy flourishes without reducing the number of people employed or the rate of job growth, they should consider increasing the minimum to $40 or even $50 an hour. I’ll certainly be watching closely.
Meanwhile, if I were asked what Los Angeles’s most important problem is, I doubt I’d say it was that it didn’t have enough minimum wage workers or the San Andreas fault or even the drought. I think I’d say that Los Angeles’s most important problem is that its prosperity depends on factors the city is not willing to promote. It’s dependent on cheap energy and enough water to supply a growing population. The city hasn’t financed a new water project in decades. And Southern California’s closing of nuclear power plants and coal-fired plants in favor of yet-to-be-built natural gas (or other) power plants is another grand experiment. It may work. It may not. Stay tuned.
