Another Possible Reason for Obama's Minimum Wage Push

Obama's minimum wage push could be an honest attempt to reduce poverty, but since only a trivial percentage of the American work force earns the minimum wage, and most of those are in starter jobs rather than trying to support a family, it does not make a lot of sense.

On the other hand, it could be another cynical payoff to unions that form the backbone of Obama's political support

Organized labor's instantaneous support for President Obama's recent proposal to hike the minimum wage doesn't make much sense at first glance. The average private-sector union member—at least one who still has a job—earns $22 an hour according to the Bureau of Labor Statistics. That's a far cry from the current $7.25 per hour federal minimum wage, or the $9 per hour the president has proposed. Altruistic solidarity with lower-paid workers isn't the reason for organized labor's cheerleading, either.

The real reason is that some unions and their members directly benefit from minimum wage increases—even when nary a union member actually makes the minimum wage.

The Center for Union Facts analyzed collective-bargaining agreements obtained from the Department of Labor's Office of Labor-Management Standards. The data indicate that a number of unions in the service, retail and hospitality industries peg their base-line wages to the minimum wage.

The Labor Department's collective-bargaining agreements file has a limited number of contracts available, so we were unable to determine how widespread the practice is. But the United Food and Commercial Workers International Union says that pegging its wages to the federal minimum is commonplace. On its website, the UFCW notes that "oftentimes, union contracts are triggered to implement wage hikes in the case of minimum wage increases." Such increases, the UFCW says, are "one of the many advantages of being a union member."

The labor contracts that we examined used a variety of methods to trigger the increases. The two most popular formulas were setting baseline union wages as a percentage above the state or federal minimum wage or mandating a flat wage premium above the minimum wage.

  • mlhouse

    Just further confirmation that the Democratic Party is similar to organized crime, with the same kick up and kick back mechanisms.

  • Orion Henderson

    As is the Republican party. Which does not excuse the democratic party in any way.

  • Another_Brian

    "Organized labor's instantaneous support for President Obama's recent proposal to hike the minimum wage doesn't make much sense at first glance."

    Only to anyone that hasn't seen this exact same analysis of their support for all the other proposed minimum wage increases. Just like all of the other supporters that already pay employees more than the minimum wage, it's not about helping out their own employees, it's about raising the costs for their competition. The unions can't pay their people $20 per hour if the people that would be hiring them are instead hiring free agents that only charge $7 per hour.

  • Matthew Slyfield

    Another issue is that minimum wage increases tend to trickle up the payroll.

    If a company is forced to increase wages at the bottom layer, the next layer up will demand increases to keep their premium over the bottom. Rinse, repeat until you get to the CEO. A company that doesn't do this could end up with significant retention problems.

  • Daublin

    Yes. So minimum wage hikes are helpful even to union workers where the pay isn't pegged to minimum wage. Some people who would pay $5 for the low-skill worker will think again if they have to pay $10/hour.

    Generally, a higher minimum wage is helpful to everyone that keeps their job.

  • bigmaq1980

    Yes, that is part of it. But, a bigger factor is probably the perception it leaves. They do it because it "appears" that they care and are doing something for the poor. The actual economic consequences are irrelevant because it is political power that is the target, and the voting poor are ignorant to those consequences. They throw in a good dollop of envy for good measure.

  • DensityDuck

    "most of those are in starter jobs rather than trying to support a family"

    Actually, according to the people who think minimum-wage increases will solve everything, there's no such *thing* as a starter job. The first job you have is the last job you'll ever have. Sometimes people get a better job, but that's just because they had some kind of patronization system, some Old Boys Network, or they're a token hire to maintain diversity, or maybe they just got lucky.

    So, to these people, it's important that fry cooks make enough to support a family of however-many, because that guy will never be anything other than a fry cook.

  • Orion Henderson

    Took three reads to get you. But..yup. There is no opportunity for advancement unless you are a privileged white male. Disregard our president as exhibit A disproving this concept.

  • Joshua Vanderberg

    I am sure you are right that this is a major driving factor. There are several other cynical reasons to increase the minimum wage, #1: increasing the minimum wage increases the number of people on the minimum wage, which can then be used as an argument for other progressive policy interventions. #2: Increasing the minimum wage increases unemployment of low skilled workers, which can then be used as an argument for other progressive policy interventions. #3: Increasing the minimum wage increases prices, which decreases the buying power of the poor, which than can be used as an argument for other progressive policy interventions.

  • Me too

    Oh thank god I'm a white male

  • MingoV

    Obama loves unions because he thinks they help Democrats win elections. The irony is that today's unions are rarely deciding factors in elections. The ratio of union to non-union employees keeps falling. Fools like Obama don't see that sucking up to the unions is worse than useless. Almost all union members will vote democrat whether the government kisses union ass or not. The actions taken to kiss union ass harm the economy and result in job losses, and union workers (except those of government employees) get hit harder than most other workers.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    This is exactly why Obamalini wants to raise the min wage.

    The Democrat party is the party of public theft, far, far worse than Repugs.

    While certain Repugs have successfully bent the system to their wishes, it is Dumbasscraps who are on the cutting edge of pension spiking and public sector union abuses, outright public theft and redistribution, and cementing a leviathan bureaucracy to ensure permanent sclerosis and leftist hegemony.

    If Obamalini gets away with everything he wants to do as spelled out last night, it will effectively be the end of the Constitutional republic, and Republican and right-wing resistance.

  • Canvasback

    Who wouldn't like Obama? Heck, we didn't even have to ask for a raise, let alone earn it. Is this the act of a philosopher king, or a benevolent despot?

  • marque2

    That works well if the economy is rip roaring - but when people still feel lucky to have jobs - I have my doubt's.

  • Matthew Slyfield

    Will a minimum wage hike go away after the economy picks back up? The effect is more or less permanent.

  • obloodyhell

    Grover Cleveland's response to Obama's SOTU:

    “When we consider that the theory of our institutions guarantees to every citizen
    the full enjoyment of all the fruits of his industry and enterprise, with only such
    deduction as may be his share toward the careful and economical maintenance
    of the government which protects him, it is plain that the exaction of more than
    this is indefensible extortion and a culpable betrayal of American fairness and
    justice … The public Treasury, which should only exist as a conduit conveying
    the people’s tribute to its legitimate objects of expenditure, becomes a hoarding
    place for money needlessly withdrawn from trade and the people’s use, thus
    crippling our national energies, suspending our country’s development,
    preventing investment in productive enterprise, threatening financial disturbance,
    and inviting schemes of public plunder.”

    Cleveland’s third annual message to Congress (i.e., SOTU), December 6, 1887

    ==================================================

    ... "inviting schemes of public plunder". Wow.

  • marque2

    The point is that it is much harder for everyone to demand a raise when the minimum wage goes up when supply greatly outstrips command. That is all. I am not making a statement about the relative efficacy of the minimum wage.

  • Matthew Slyfield

    That is true, but they can make that demand as soon as the supply/demand ratio tightens up, so the effect on the entire payroll stack is still there.

  • Todd Ramsey

    IMO, Obama, with his economic ignorance, actually believes raising the minimum wage helps low-income people. In his mind, he is helping low income people while also helping the Unions. A win-win!

  • http://itsaboutliberty.com/index.php MNHawk

    Well, truth be told, if that guy is a product of the U of Minnesota's African American Studies Department, last seen calling for an end of police releasing descriptions of suspects on the loose, they only job he will probably have is Fry Cook.

  • Gdn

    Union members aren't a huge democrat voting block, but their funding is. Unions are a nongovernmental entity that can levy taxes on people that aren't even members, and then donate a major portion of those taxes to the Democrat Party...despite the Supreme Court ruling.

  • Cosmo

    Well, he IS half-white, so he did get half a leg up.