posted May 25, 2006
Many legislators and lobbyists have used these final days of Tennessee’s legislative session to advocate for a statewide increase in the minimum wage. Never has an idea sounded so compassionate in chamber floor oratories and media rhetoric, but been so careless and unfounded in its simple logic as that of an increased minimum wage. The disadvantages of a minimum wage increase would be broad and far-reaching and include widespread unemployment of low-skilled workers and a loss in buying power for all Tennesseans.
A state legislator carrying the banner for an increase in the minimum wage recently said, “There’s nobody that can live on $5.15 an hour.” In truth, very few Tennesseans actually have to live on a wage of $5.15 an hour. Only 1.5% of the state’s workforce—approximately 40,000 workers—is employed at minimum wage levels. Furthermore, the majority of Tennessee’s minimum wage earners are either teenagers living at home and working for weekend pocket money or married individuals working part-time to supplement their spouse’s income.
If teenagers working to pay for video games and moms working a few hours a week so the family can go on longer vacations are the primary minimum wage earners in the state, what about all of the struggling single mother human-interest stories portrayed by those who want the minimum wage increased? Have Tennesseans been duped? In a word, “yes.”
Of Tennessee’s 40,000 minimum wage earners, fewer than 4,800 are single parents. The political pressure for creating a state minimum wage that eclipses the federal standard comes, not from compassionate souls interested in bettering the lot of Tennessee’s working poor, but from moneyed special interests. No interest group has spent more money and time in the effort to increase the minimum wage than the labor union.
Tennessee’s flagging labor unions have two carefully concealed motives for increasing the minimum wage. First, unions commonly index their own wages to minimum wage rates. The pay of a union worker is often a multiplier of the minimum wage—with hourly wages set at four, six, even 10 times the minimum wage. This means that a $1 an hour increase in the minimum wage would cost businesses hundreds more a week for each union employee, leading to an increase in the price of everything from cars and houses to monthly utility bills. Second, union lobbyists know that an increased minimum wage expands the might of unions because of contractual obligations and a reduction in non-union workers.
The fact that the minimum wage increase movement is largely financed by - and serves to veil the self-interest of — labor unions, does not discount the fact that a minimum wage hike would affect Tennessee’s working poor. Unfortunately, the impact would be decidedly ruinous to these already struggling individuals.
When higher labor costs squeeze businesses, the most frequent reaction is to adjust by sacking the least productive workers. Moreover, the minimum wage workers most susceptible to losing their jobs will be adults, including the single parents the pro-wage increase forces claim are helped most by a minimum wage increase. Individuals who work in minimum wage positions into adulthood are the least likely to have the skills necessary to make them valuable to their employers. This means that the brass tacks result of a minimum wage increase is a pay raise for relatively affluent high school students living at home, while single parents lose jobs and struggle with the uncertainty of attempting to find new ones in a more constrained employment market. Thus, a minimum wage hike would be most harmful to precisely the individuals that are supposed to be helped by it.
Besides the mass unemployment of Tennessee’s working poor, an increase in the minimum wage creates a second, even more widespread unintended consequence: higher prices for goods and services across the state. Well-meaning business owners faced with a new state law making it a crime to pay employees less than a certain amount, and without the manpower to regulate costs by firing the least productive workers, must raise prices in order to generate the same level of profit as before. This common response to an increased minimum wage ultimately inflates the price Tennessean’s pay for goods and services, more than offsetting the newfound wage increase by minimum wage workers lucky enough to keep their jobs. Further, unscrupulous business owners may be tempted to utilize illegal immigrants or other black market options for employees following a minimum wage increase to avoid the choice between raising prices or reducing the size of their workforce.
Opposition to a minimum wage increase should never be misunderstood as indifference to the poor workers, just as support for the rise in the minimum wage rate—especially when it comes from self-interested labor unions—must not be mistaken for concern for struggling workers. An increase in the minimum wage in Tennessee, no matter how well intentioned, will ultimately lead to widespread unemployment and loss in buying power to the working poor—those we should be most concerned with helping. Indeed, if it truly is the first mark of a compassionate society to reflect on what it can do for the least among it, that same society must be reflective enough to remove the cancer of need without injuring the patient.
Troy Senik
Tennessee Center for Policy Research
* * *
Mr. Senik,
Thank you for unbiased facts concerning Labor Unions and their wage structure. I am quite surprised to hear that the wages are based on minimum wage. I was under the impression that wages were negotiated based on fair and free market values as well as market share.
I also thought that they would be based on knowledge, experience, special technical training such as a three to five year apprenticeship in many industries. In our area, a Union electrician spends 10,000 hours in on-the-job training and five years in an apprenticeship to become a Journeyman.
Having participated in several contract negotiations, I have never heard either Labor or Management suggest basing wages on the minimum wage, using a multiplier, etc. I suppose I would have to discount that statement as opinion. However, using your figures on the minute number of people who actually earn the minimum wage, it doesn't seem that there would be much real cost to increase it. I guess that’s just an observation from someone who enjoys weekends, and realizes that Union Labor fought for them.
I also recognize that vacation time and especially paid vacation time, holidays with pay, health insurance, pension plans, etc. would all be too expensive for companies to provide, had it not been for Labor Unions. I urge you during your next time of leisure to consider that someone before you, and probably someone in a Labor Union, worked and fought, probably to their immediate detriment, so that we could all have a better life and a higher standard of living.
The results of our forefathers efforts still affects both the Union and the non-Union portion of the workforce. Where would we be without them? Probably all making minimum wage.
Gary M. Watkins, President
Chattanooga Area Labor Council
Chattanooga
garywatkins@hotmail.com
* * *
In the heat of a minimum wage fight, it is fairly common for the opposition to play “Chicken Little” and claim that the sky will fall because low-wage workers want a raise. They rarely have any solid evidence to support this claim, and neither did Troy Senik in his May 23 editorial in The Chattanoogan.
Minimum wage increases do not cause job loss. A March 2006 report from the Fiscal Policy Institute found that state minimum wage rates that are higher than the federal rate have not had a negative effect on employment. Between January 1998 and January 2006, employment overall grew by 9.7 percent in higher minimum wage states, versus employment growth of 7.5 percent in states with a $5.15 minimum wage.
The last time Tennessee raised its minimum wage—the 90 cent increase to $5.15 in 1997—8.7 percent, or nearly 200,000 Tennessee workers benefited, according to research done by the Economic Policy Institute. That’s a lot more than the 40,000 Mr. Senik predicted.
With gas prices and health care costs skyrocketing, working families in Tennessee need and deserve this raise. As an advocate for all working people, the AFL-CIO will continue to push for a minimum wage increase here in Tennessee and across the country.
Jerry Lee, president Tennessee, AFL-CIO
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