Why Unions Exempt Themselves from Hard-Fought Minimum Wage Hikes

Unions have been at the forefront of drives to raise the minimum wage to $10, $12, or $15 an hour. Take Fight for $15, funded by the Service Employees International Union, demonstrations that occur regularly outside fast food outlets.  Or, take Black Friday demonstrations outside Walmart, organized annually the day after Thanksgiving by OUR Walmart, funded by the United Food and Commercial Workers. But now that unions have achieved their goal in Los Angeles, their leaders want to exempt unionized workplaces from the minimum wage hike.  

Reasonable people might think that unions’ battles to raise the minimum wage are motivated by concern for low-income Americans. The union-funded Los Angeles campaign, Raise the Wage, stated, “Raise the minimum wage -- and not just a little, but enough to bring the hundreds of thousands of Angelenos who power our economy into the middle class. It's good for business, it's good for taxpayers, and, most of all, it's the right thing to do for workers, who have earned it.” The Los Angeles City Council was persuaded, and voted to increase the minimum wage in Los Angeles to $15 an hour. (For prior E21 coverage by Jared Meyer see here.)

Although the union-funded Raise the Wage campaigned so vociferously in favor of a $15.25 minimum wage, unions are seeking exemptions from the higher wages for their members. The exemption, or escape clause, would allow them greater strength in organizing workplaces.  Unions can tell fast food chains, hotels, and hospitals that if they agree to union representation, their wage bill will be substantially lower.  That will persuade employers to allow the unions to move in.  

One of the leaders of the Raise the Wage coalition, Rusty Hicks, Executive Secretary-Treasurer of the Los Angeles County Federation of Labor, AFL-CIO, stated, “With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them. This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing."

Everyone wants to “negotiate an agreement that works for them both,” in Hicks’s words. Teens that need summer jobs would like to work out such agreements, as Meyer and I show in our new book, Disinherited: How Washington Is Betraying America’s Young, so they can get their foot on the first rung of the career ladder. But unions are only in favor of exemptions for organized labor.

Once the higher minimum wage bill is signed into law, with the exemption for unions, then organizing becomes a win-win for employers and unions. Unions get initiation fees of about $50 per worker and a stream of dues totaling 2 percent to 4 percent of the workers’ paychecks.  Employers get a lower wage bill.  

The losers in this scheme are employees, who have to pay union dues out of their paychecks.  Jobs become more scarce as wage levels rise and some less-skilled workers become unemployed.

Los Angeles unions have not yet won the exemption to the $15 minimum wage they desire.  But other unions have.  In many cities unions support minimum wage hikes, and then negotiate an exemption, in order to force employers to unionize.

Consider the minimum wage increase for hotels close to Los Angeles Airport that was passed in 2006.  Under the Hotel Worker Living Wage Ordinance, employers had to pay $9.39 an hour if health insurance was provided, and $10.64 an hour without health insurance.  Unionized hotels were exempt.

In California, San Francisco, Oakland, Richmond, Long Beach, and San Jose all have minimum wage laws with exemptions for unionized workplaces. One example:  The San Jose Minimum Wage Ordinance contains Section 4.100.050, entitled Waiver Through Collective Bargaining, that states, “…all or any portion of the applicable requirements of this Chapter may be waived in a bona fide collective bargaining agreement, provided that such waiver is explicitly set forth in such agreement in clear and unambiguous terms.”

Further north, Seattle-Tacoma Airport had the first $15 minimum wage in the United States, voted into law in 2013.  Yet employers that have collective-bargaining agreements are not subject to the higher wage. Section 7.45.080 of the SeaTac Municipal Code reads, “All of the provisions of this chapter, or any part hereof, including the employee work environment reporting requirement set forth herein, may be waived in a bona fide collective bargaining agreement…” 

Union exemptions to minimum wage laws are not limited to the West Coast.  They can also be found in Milwaukee, Wisconsin, and Chicago, Illinois.

Unions are resorting to campaigning for higher minimum wage laws and then carving out exemptions for themselves because they are desperately short of members. Their membership has been steadily declining over the past three decades.  In 1983 (the earliest year with comparable data), 20 percent of American workers belonged to unions. By 2014 only 11 percent of American workers, and only 6.6 percent of private sector workers, were union members. Union membership is 3 million below 1983 levels, despite an increase in employment of 48 million.

Instead of exempting union workers from the minimum wage, it would make sense to exempt teens and low-skill workers, because they are the ones most harmed.  

Rather than caring about low-income Americans, unions care about their own power. Dues and initiation fees are often used to pay for political contributions. Unions donated $60 million to the 2014 campaign, almost all to Democrats. Don’t expect municipalities with Democrat governments elected with these donations to stand in the way of union hypocrisy.