Friday, September 28, 2012

Myths of Unionization and Minimum Wage.

As with every election season the air waves and Internet is full talking heads and politicians stumping about how the economy should be run.  To this day I don't why Democrats and Republicans don't get along.  After all, both are for "jobs," "a strong middle class" and "fixing the economy."  Of course while making the case for their version of these things "the other guy" wants to "destroy" jobs, the middle class and the economy.

A couple of polarizing topics that will come up is unions and the minimum wage.  Many people, myself included have gone into the reasons why increases to the minimum wage and unions (especially public sector unions) actually damage the economy.  Simply put, minimum wage increases drive up the cost of goods and services at every level and these increases are passed on to the consumer.  Your dollar means less.  With a legally mandated working conditions, safety guidelines, workday, etc. unions aren't exactly fighting for safer working conditions or keeping the workers from getting screwed.  Today, the only thing on the table for unions is negotiating more pay and benefits for less work.  Less work per worker means more employees. This also translates to more expensive goods and services.

These cases have been made over and over again with no real change in dialog.  As with every election cycle the Left is going to one of their default tactics.  Scaring the crap out of people.

There are two prevalent myths about unions and minimum wage.  Both of which state that without unions and minimum wages the workers will be pushed into poverty while rich fat cats, who no doubt look like the guy from Monopoly will fornicate with super models on top of stacks of cash.

The last couple years right-to-work laws have been coming up in several states.  Right-to-work laws essentially state that a person does not have to pay union dues or participate in unions as a condition of employment.  This has been deemed by the Left as a "war on workers."  The idea is that if unions don't prevail we will be have our wages or salaries cut, we'll lose all of our benefits and be shoved off to the poor house.

I have one question: Are you a member of a union?

If you are an American, there is an 88.2% chance the answer to that question is "no."  Statistically speaking, only 11.8% workers are in a union (6.9% of private sector employees and 40.7% of public sector employees).  Union membership continues to decrease every year.  The fact of the matter is that workers do not want to be in a union.  But to hear the unions, not belonging to a union means you are about to become a serf.  That being said, if you were to look at Toyota and GM what you will find is very telling.  Non-unionized Toyota workers get paid more than unionized GM workers.  While GM has a pension retirement plan, that is the primary source of GM's financial woes.  They are contractually obligated to spend on pensions first, cars second.  This results in poor quality products, which translates in to few cars sold, less revenue and on until they go bankrupt or bailed out.

Similarly, we have the minimum wage.  Without the minimum wage we'd all be paid pennies a day just like in China, or whatever.  We've all heard this boogeyman story.  If we don't raise the minimum wage, why we'll all be in the poor house.  Then corporate big wigs will fornicate with supermodels on stacks of cash while we all starve.  And yes, said corporate big wigs look like the guy from Monopoly.

This is inaccurate.  We are a consumer driven society.  Everyone has stuff they need to buy, stuff they can sell.  But what if you're not a business owner?  Or don't have oil shooting out of the ground in your backyard?  What can you sell?  Yourself.  Your work, actually.  When you go to work at a job, any job, you are selling your labor.  Your job is a contract between you and your employer for you to carry out certain tasks for a specified period of time.  As part of the agreement you are paid as per your contract.

The fact remains that the majority of people earn more than the minimum wage.  The logic that if we don't have a minimum wages means that we will all earn nothing is flawed.  If the minimum wage were the only thing keeping us from earning pennies a day, then it stands to reason that we'd all be earning the minimum wage.  As as stated that is obviously not the case.

Why is this?  The answer is simple.  Free market, supply and demand.  When it comes to the supply of labor, we the people are in control.  We determine what we are willing to do for what price.  The minimum wage is currently $7.25 per hour.  Let's take two occupations, grocery bagger and logger.  The grocery bagger makes minimum wage and the logger makes much more.  The question becomes, if they both paid $7.25 per hour, which would you do?

If every job paid the minimum wage no one would dig coal, cut down trees or drive trucks.  But what about cushy white collar jobs?  While not physically demanding, white collar jobs come with a level of stress.  Again, who would go to school for ten years to become a doctor if it only paid minimum wage?

At the end of the day, don't let yourself be cowed by these arguments.

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