Out of Control Policy Blog

Worker woes

Russell Roberts writing it the LA Times:

    LABOR UNIONS' importance in the workplace has fallen steadily since 1950, when roughly a third of American workers were unionized. Today, that number is well below 10% in the private sector.

    The Employee Free Choice Act, now before Congress, aims to reverse that trend by making it easier for unions to gain certification and stiffening penalties for interfering with a unionization drive. After all, supporters argue, without union representation, how can individual workers have the bargaining power needed to get their fair share of the economic pie?

    But maybe unions aren't so crucial to worker well-being. When more than 90% of the private-sector labor force isn't unionized, why do 97% of us earn above the minimum wage? If our bargaining power is so pitiful, why don't greedy employers exploit us and drive wages down to the legal minimum?

    The simple answer is that bargaining power comes from having alternatives. Even in the absence of unions, employers have to treat workers well to attract and keep them. In a workplace as dynamic as that of the United States, where millions of jobs are destroyed and created every quarter, a company's ability to exploit workers is greatly limited by how easy it is to find another job.

Of course voters like to do what they can to limit "exploitation." They pull the lever (or punch the hole) for minimum wage hikes, thinking of how pleased the workers who will get a raise will be. But what about those other workers?

After Arizona voters hiked the minimum wage some businesses are finding that they're better off with fewer workers, especially fewer teen workers:

    Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.

    "I've had to go to some of my kids and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you.' "

San Francisco restaurant owners must figure out how to deal with a triple-threat: a recent minimum wage hike, a new requirement that they provide sick leave, and (coming in July) health care as well:

    "They may call themselves progressive,'' Mark Pastore, the owner of Incanto Restaurant on Church Street, said of the San Francisco Board of Supervisors. "But their actions are paving a path for only large, ruthless, profit-driven corporations to survive in San Francisco. Is this the San Francisco we want to build?''

    ...

    Gayle Pirie, the chef and co-owner of Foreign Cinema, a moderately priced Mediterranean bistro on Mission Street, also is staring at potential additional annual costs of more than $200,000.

    She and partner John Clark like to give year-end bonuses to the kitchen staff. Now those are threatened.

    "With these mandatory benefits, we have less control over giving benefits to our employees," Pirie said. "You are forced to restrain your generosity in ways that are not your style.''

    Tres Agaves is a partnership between Manzare, the chef, Sammy Hagar, the rocker who heads Cabo Wabo Enterprises, and Julio Bermejo, owner of Tommy's Mexican Restaurant on Geary Boulevard. Its 38 investors put more than $2 million into the 10,000 square-foot place. The partnership is considering another location -- but it won't be in the city.

    "I can tell you that as of right now, we are not looking to expand in San Francisco,'' said Eric Rubin, a managing partner. He called the city's business environment "onerous."

Article here.

Related: NBER lit review on minimum wage

Ted Balaker is Producer


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