Saturday, December 09, 2006

Minimum Wage HURTS the most vunerable workers

Don't take my word for it. Before we pass a new federal minimum wage, let's see what's happening where the states have just increased THEIR minimums.

Nevada has learned that, because of the new minimum wage law, some disabled people will lose their jobs. This will cost taxpayers, damage their self-esteem, and is a completely predictable result of forcing employers to pay workers more than they are worth.

From the Las Vegas Review-Journal, Programs get dire news on minimum wage law:

Several Nevada nonprofit organizations received grim news Friday that could affect their ability to offer jobs to disabled people.

Labor Commissioner Michael Tanchek told representatives of the nonprofits that he sees no way to exempt them from a new minimum wage law that took effect last month.

The desire to exempt people is an admission that the idea of minimum wage laws is flawed -- the only reason to exempt people is if paying minimum wage is a problem. Of course, it IS a problem, any time you force employers to pay more for a service than that service is worth, it's like taxing them. And if you apply this type of tax, employers will eliminate the workers that are the least valuable (and therefore impose the highest tax) and replace them with workers that are more valuable.

Organizations including Southern Nevada's Opportunity Village and Easter Seals previously have been allowed to pay disabled clients based on the amount of work they can perform in an hour, called piece-work, instead of a set wage. The recent voter-approved boost in the minimum wage, which raises it to $6.15 an hour for employers who don't provide health insurance, makes no exemption for piece-work.

The piece-work rule was already a government-imposed band-aid to the problem of interference in the employer-employee relationship. It would be better for the disabled if employers had the choice of how to pay them in whatever way was best for both employer and employee. Employees might be better off with a real salary, and might even make more than with piece-work, but employers were prohibited from offering salaries if those salaries were not minimum wage.

The new wage could apply to nearly 400 of Opportunity Village's clients, including those who work at the organization's thrift stores. It would cost the organization an extra $1.7 million more a year to pay them the minimum wage, Guthrie said.

Other agencies that could be affected by the new law include High Sierra Industries in Reno, Fallon Industries and Washoe Arc, formerly known as the Washoe Association for Retarded Citizens.

The article seems to support exemptions for these organizations from the minimum wage. But it doesn't explain why these organizations deserve to pay less than minimum wage, while business gets no exemption. If some workers are obviously not worth the miminum wage, than it should be obvious there are others equally undeserving -- and I dare say there are some disabled people who would be worth more as employees than some "normally-abled" people.

"I don't know what we're going to do" if forced to pay minimum wage, said Brian Patchett, chief executive of Easter Seals of Southern Nevada.

Easter Seals also works with people with disabilities and includes a job training center. The new minimum wage would affect 150 to 200 workers at the center who perform tasks such as packaging perfumes and putting together packets for events.

"It's going to end up costing a lot more money or we're not going to be able to provide these programs in the same way," Patchett said. "Somebody's going to have to meet those costs."

He added that he supports the minimum wage increase, but "there needs to be an exemption for people in very specific programs who have serious disabilities."
He said if forced to pay the workers minimum wage from now on, Opportunity Village might have to "seriously retool" its employment program, possibly by cutting workers' hours.

The point is that it is clear to these groups, and to the reporter, that some people will lose their jobs if employers have to pay minimum wage. That will be just as true with a new federal minimum wage.

And what of the argument that the current minimum wage is just too low to be worth it for ANYBODY to work at that wage? That's the argument for increasing the wage, right, that no employee should be paid so little because it's just not enough money to be worth it? Well, the article points out the absurdity of THAT argument as well:

While many of the affected workers make very little, Guthrie said, some less than 20 percent of minimum wage, the money helps them a lot.

"Many of these people live with family ... on a fixed income," he said. "Even if you only make $50 a week, it helps pay for heat, air conditioning, puts groceries on the table or even pays just to go to a movie."

If we pass a new minimum wage bill, some people will make more money. But we'll also read a lot more reports like this, where workers lose their jobs, or lose hours, or companies spend valuable time and money trying to fight the regulations.

I wonder what the Unions think about this?

Danny Thompson, executive secretary and treasurer of the Nevada AFL-CIO, which backed the minimum wage increase, did not return a call seeking comment Friday.


Vivian J. Paige said...

While I have not looked at the Nevada minimum wage law, it seems that there is a simple answer here: restore the ability to pay piece work.

This is what happens when an amendment is poorly drafted. Unintended consequences abound. How come no one noticed this before? Did they just assume that nothing would change?

And why does this sound vaguely familiar?

Charles said...

It's true, they could simply restore the special exception.

Then the only people to be hurt would be everybody else who doesn't get a special exception.

Or we could stop meddling in private business affairs, and simply pass laws ensuring that people are not deceived or coerced into labor contracts.

Citizen Tom said...

Good post.

We have tried this foolishness before. I guess each generation has to learn some things for itself.

Government can only manage so much. The government may be able regulate the economy, but it cannot run the economy. As the USSR proved too well, command economies do not work. When the government tries to command a minimum wage, we run into the same kind of problem we inevitably run into with any other kind of wage and price controls. An arbitrary wage or price set by Uncle Sam may sound nice, but it is the laws of supply and demand that actually determine what people will pay.

Anonymous said...

Happens every time the dimmi types are in charge of anything. They fix nothing and destroy all.