The Union Minimum Wage Windfall: California’s $15 hourly rate will put money in labor’s pockets, no collective bargaining required.

Original Article:

  • Author: Michael Saltsman

  • Publication Date: May 2016

  • Newspaper: Wall Street Journal

  • Topics: Minimum Wage

When Gov. Jerry Brown signed California’s $15-an-hour minimum wage into law in April—it will rise to that figure by 2022-23 from $10 today—he wasn’t merely advancing organized labor’s political agenda. He was giving its members a substantial pay raise, no collective bargaining required.

This sort of direct union pay benefit from a minimum-wage hike is unusual. Bureau of Labor Statistics data show that the median weekly earnings of a union member in 2015 were $980, or more than three times what an employee would earn working full time at the federal minimum wage of $7.25. Union support for a minimum-wage boost that doesn’t directly affect its members is motivated by other factors.

For instance, unions such as Unite Here, which represents hospitality workers, have pursued higher minimum-wage requirements as an organizing tool to encourage hotels to welcome the union in and thus exempt themselves from an onerous wage law. For other unions, a higher minimum wage is an indirect means of boosting their members’ pay. Past union contracts available from the Labor Department’s Office of Labor-Management Standards contained language setting members’ wages to a certain percentage or dollar amount above the current minimum wage.

At the $15 minimum-wage level, the union benefit for certain types of workers is more direct. The median weekly wage for a unionized food-prep employee is now $515, according to the Bureau of Labor Statistics, or just under $13 an hour full-time. (The numbers are similar for personal-care and health-care-support employees.) Using Census Bureau data, my organization, the Employment Policies Institute, estimates that roughly 223,000 union members in California will receive a direct pay bump by the time the law is fully implemented. A majority of the affected employees are concentrated in four industries: retail, health care, education and public administration (i.e., government).

Taxpayers in California are on the hook to fund pay raises for the roughly 45% of affected employees who work in the public sector. According to the Sacramento Bee, the state’s Department of Finance pegs the salary cost for state-employee pay raises alone at $235 million in fiscal year 2022-23. In an interview with the Bee after the wage law was passed, a past president of the California State Employees Association, J.J. Jelincic, predicted that these costs could ripple beyond those currently earning less than $15: “My experience is that when you raise the floor, it creates tremendous pressure for raises at least a few rungs up.”

Mario Cilento, president of the New York state AFL-CIO, was even more explicit when his state passed a $15 minimum-wage requirement in April, the Bee reported: “Those of you making 16 or 17 or 18 dollars an hour, the next time your union goes in to negotiate, they’re going to ask for 19 and 20 and 21 dollars and up!”

From this perspective, a $15 minimum wage looks like a shrewd investment for labor. Dave Regan, whose powerful Service Employees International Union (SEIU) local in California represents health-care workers, spent roughly $1.6 million to collect the signatures needed to qualify the $15 ballot measure that forced Gov. Brown’s hand. In return, union members earning less than $15 an hour will collectively receive an estimated bump in annual earnings of $883 million in 2022, when the law is fully phased in for them.

Some of these dollars are then kicked back to the union in the form of more dues money. A review of federal filings of California-based SEIU locals confirms that many set their dues payments as a percentage of employees’ wages, typically 1% to 2%. One percent of $883 million in additional annual wages for California union members would yield roughly $9 million per year in new dues dollars.

That’s good news for organized labor. But it’s terrible news for taxpayers—not to mention the thousands of employees in the private economy whose jobs are now at risk.