Los Angeles Unions' Two-fer on Minimum Wage By David Henderson

When the U.S. minimum wage law was put into effect in 1938, northeastern labor unions gained from it by pricing out their competition. Unions in the textile industry were seeing textile firms move from New England states to southern lower-wage states and wanted to hobble the competition. This motive was present in the 1950s and 1960s also. I have previously reported Senator John F. Kennedy’s racist grounds in 1957 for favoring a minimum wage increase.

Now the Los Angeles City Council has taken this union strategy and raised it. The city fathers–or maybe we should call them stepfathers–have passed a law requiring that hotels pay a minimum wage of $15.37 per hour. That would hobble competition from hotels that currently pay less than $15.37 an hour.

But wait; there’s more. Not content to hobble competition that way, the City Council has an exemption for unionized workers if these workers “agree in their contract to relinquish that opportunity.” This is pretty brazen. Of course, it gives employers an incentive not to fight the unionization of their labor force. It’s an incentive on the margin, of course. Employers will need to take account of all the other costs of having a unionized labor force. But this exemption will, for some of these hotels, cut one of those costs.

In short, the Los Angeles City Council has done a two-fer for unions.

That gives the lie to the claim by backers of this measure. According to the Los Angeles Times news story, “Backers of the measure said it would prevent hotel workers from having to take on second jobs that keep them from seeing their families.” But if that were their goal, they would not have the special exemption for unionized workers. One could argue that they would exempt unionized workers because they understand that the minimum wage would reduce employment of such workers. But if they understand that, then they would also understand that the minimum wage reduces employment of non-union workers. They can’t have it both ways.

It’s true that the measure exempts hotels “that face severe financial hardships.” My strong guess would be, though, that a Los Angeles city government official gets to decide what constitutes severe hardship in each case and that the city government will use this power to shake down the hotels that apply for a hardship exemption.

HT2 Scott Shackford.