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Why Raising Minimum Wages Does More Harm Than Good

On Friday, Salon reported Breaking: Massive Black Friday strike and arrests planned, as workers defy Wal-Mart.

 Defying the nation’s top employer and a business model that defines the new U.S. economy, Wal-Mart employees and allies will try to oust shopping headlines with strike stories, and throw a retail giant off its heels on what should be its happiest day of the year. By day’s end, organizers expect 1,500 total protests in cities ranging from Los Angeles, Calif., to Wasilla, Alaska, including arrests in nine cities: Seacaucus, New Jersey; Alexandria, Virginia; Dallas; Minneapolis; Chicago; Seattle; and Ontario, San Leandro, and Sacramento, California.

On December 1, the New York Times reported Wage Strikes Planned at Fast-Food Outlets.

 Seeking to increase pressure on McDonald’s, Wendy’s and other fast-food restaurants, organizers of a movement demanding a $15-an-hour wage for fast-food workers say they will sponsor one-day strikes in 100 cities on Thursday and protest activities in 100 additional cities.

The movement, which includes the groups Fast Food Forward and Fight for 15, is part of a growing union-backed effort by low-paid workers — including many Walmart workers and workers for federal contractors — that seeks to focus attention on what the groups say are inadequate wages.

The fast-food effort is backed by the Service Employees International Union and is also demanding that restaurants allow workers to unionize without the threat of retaliation.

Officials with the National Restaurant Association have said the one-day strikes are publicity stunts. They warn that increasing pay to $15 an hour when the federal minimum wage is $7.25 would cause restaurants to rely more on automation and hire fewer workers.

On Aug. 29, fast-food strikes took place in more than 50 cities. This week’s expanded protests will be joined by numerous community, faith and student groups, including USAction and United Students against Sweatshops.

Fight For 15

Inquiring minds are investigating the Fight for 15 website. Here is a snip.

 Stand with striking Chicago fast food and retail workers!

We, hundreds of fast food and retail workers, went on strike at 30 stores in the Loop and the Magnificent Mile to demand $15 an hour and the right to form a union without retaliation. Employers like McDonalds, Whole Foods, and Sears are raking in enormous profits while workers like us, mostly adults with families, don’t get paid enough to cover basic needs like food, rent, health care and transportation.

We are risking our jobs as we continue to stand up and say ENOUGH. And we need everyone who supports us to join us. It’s time to give every worker a chance to survive and thrive – and strengthen Chicago’s economy.

Applicants a Mile Long

Whenever Wal-Mart opens up a store it gets tens of thousands of applicants for a couple hundred openings. People want the jobs.

Here’s the deal. If you don’t like the job, then don’t take it.

It really is as simple as that.

Should Companies Pay Workers More?

The economic illiterates think companies should be forced to pay $15 per hour. Is it even possible?

Let’s do the math.

Wikipedia
 reports Wal-Mart is the largest retailer in the world as well as the biggest private employer in the world with over two million employees.

In its last annual report, for the 12 months ending January 31, 2013, Wal-Mart had $16.999 billion in net income.

That sounds like a lot of money, and it is, but not as much as you might think. I do not have a breakdown in headcounts, pay scales, or number of part-time employees, but let’s assume that half of the 2 million workers make $8 an hour (75 cents above above minimum wage) and work 30 hours a week.

$15 an hour would be an increase of $7 per hour. $7 multiplied by 30 hours per week, multiplied by 52 weeks a year, multiplied by 1 million workers is $10.92 billion, well over half Wal-Mart’s profit.

There would also be a large number of full-time employees making above $10 per hour but less than $15 per hour.

Bump up those employees to $15 per hour and the company would not even be profitable at $15 per hour minimum. Moreover, sales would plunge at Wal-Mart, as would sales at McDonald’s and Wendy’s.

The pressure to automate would be great, and marginal stores would surely close. Yet, prices across the board would soar, and so would yields on US Treasuries (and of course interest on the national debt would skyrocket).

Then, how long would it take to discover that $15 was not a “living wage”? Less than a year?

Wal-Mart a Savior or a Pariah?

The idea that raising the minimum wage to $15 would fix anything is ridiculous.

I am not totally unsympathetic to the plight of those struggling, but I am totally unsympathetic about minimum wages because the problem is the Fed, not minimum wage laws.

Cheap money coupled with rising minimum wages encourages investment into automation as opposed to hiring of individuals. Cheap money also drives up costs of goods and services.

And given that cheap money primarily benefits those with first access to it (the banks and the already wealthy), it is not surprising that people are struggling.

Rather than protest Wal-Mart (a company that does the world a service by providing over 2 million direct jobs and millions more indirect ones), people ought to be protesting the Fed.

About the Author:  Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.

Same Old SEIU, Same Tired Attacks

Never a group to let an opportunity go to waste, the SEIU planed to disrupt travelers at major airports all over the country, and to attack retailers such as Wal-Mart during the Thanksgiving holiday weekend. Their plotting is all in the name of “social justice,” which is no more than a code name for forced unionism. The SEIU would have you believe that it has the best interest of employees at heart, and that employers like Wal-Mart “abuse” their employees through the payment of poverty wages, while lining their own pockets with the company profits. In fact, this past week, the SEIU sent out the following e-mail to its members stating that Wal-Mart pays such low wages its employees cannot afford a Thanksgiving dinner. Therefore, Wal-Mart is hosting a food drive so they can eat on Thanksgiving.

Walmart doesn’t pay workers enough for them to afford Thanksgiving dinner, so they’re holding a food drives for their employees. Seriously. The Cleveland Plain Dealer reported that Walmart stores in Ohio have bins set up for underpaid associates to donate canned goods to other underpaid associates.

We have a better idea, Walmart: Pay your workers enough to put food on the table.

If you agree, please RSVP at to join the Walmart Strikers in their fight for fair wages and respect at work.

It’s great that workers are looking out for one another, but nobody who works for one of the richest companies in the world should have to worry about not having enough to eat.

This is hardly the first time Walmart has asked for charity so they can avoid paying employees enough to get by. Low-income workers still need food, housing and healthcare, so taxpayers end up paying up to $1.7 million in public benefits per Walmart Superstore.2

We’re proud to stand with the workers who think they should be able to afford their own Thanksgiving dinners.

Join us on Black Friday to show the workers you have their back.

In solidarity,

Alesa Mackool

SEIU

The SEIU is in the midst of a Worker Center Scheme, recruiting new membership through force unionization, and attempting to bypass the National Labor Relations Act as discussed in Promises, Promises: Desperate Unions Grow Weary of Phony Distractions. They will be using these naïve recruits to bolster their ranks. The SEIU has created Worker Centers because they fall outside the rules of the National Labor Relations Act (NLRA) and therefore are not subject to National Labor Relations Board (NLRB) regulations. Through these Worker Centers, unions are able to operate and attack without restriction, allowing for even more deplorable and ruthless tactics. The real ticker is that these Worker Centers have a Tax-Exempt Status and are Funded by the American  Taxpayer.

Additionally, the SEIU and other unions will be holding Union Rallies at Airports across the country, alleging these employers are paying low wages and offering sub-par benefits. The goal is to make Americans believe these employees are being abused and mistreated. Ironically most of the SEIU protestors will be hired off the street for small cash amounts and have no idea what they are protesting. The SEIU has decided to cause as much disruption and inconvenience during one of the nation’s biggest travel holidays to embarrass these employers across the country and call attention to their cause. This is all a calculated effort to intimidate companies into signing a Neutrality Agreement and imposing forced unionism on their employees through Card Check.

As Americans shopping and traveling to visit their loved ones are disrupted by the rallies and picketing during this great national holiday, it is important to remember the true objective of these Gasping Dinosaurs. It is not to improve wages and benefits for the employees of these companies, but rather to force unionize employees by embarrassing the employers on a national stage. The truth is, the SEIU and other unions want more money in the form of union dues to enhance their political power. Just as Unions Showed True Colors on Labor Day, these Thanksgiving attacks are all about big labor’s attempt to avoid extinction. Hopefully, Americans will see these tactics for exactly what they are, nothing more than Communism at the Highest Level, and relegate the SEIU and other big labor unions into the junk pile of history.

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

D.C. City Council Proposes “Living Wage” of $12.50 an Hour

Editor’s Note: A push to dramatically increase the minimum wage isn’t limited to Washington DC. Earlier this year, Los Angeles mayoral candidate Wendy Gruel promised to push for a minimum wage of $15 per hour in that city. This report by UnionWatch contributor Mike Shedlock explains the impracticality and unintended negative consequences of mandating a minimum wage so far above market rates. But missing too often from this debate is the win-win option: To lower the cost-of-living by breaking up monopolies and permitting land and energy development. California has unaffordable energy and housing because of artificially imposed restraints on development, and the environmental justifications are a smokescreen. Monopolies benefit from restrictions on development, as do the unions who populate monopolized industries. And unionized government, the ultimate monopoly, benefits the most from restrictions on development and competition, since their headcount grows in direct proportion to the degree of repression they may impose on emerging entrepreneurs, developers, and competitive businesses who threaten the status-quo. If land and energy development restrictions were relaxed, minimum wages would buy a lot more.

D.C. is on the verge of passing a Living Wage” law mandating $12.50 an hour wages, but only for retailers with corporate sales of $1 billion or more. The response from the world’s largest retailer is hardly unexpected.

Wal-Mart Threatens to Pull Out of D.C. 

The Washington Post reports Wal-Mart says it will pull out of D.C. plans should city mandate ‘living wage’.

 The world’s largest retailer delivered an ultimatum to District lawmakers Tuesday, telling them less than 24 hours before a decisive vote that at least three planned Wal-Marts will not open in the city if a super-minimum-wage proposal becomes law.

The company’s hardball tactics come out of a well-worn playbook that involves successfully using Wal-Mart’s leverage in the form of jobs and low-priced goods to fend off legislation and regulation that could cut into its profits and set precedent in other potential markets. In the Wilson Building, elected officials have found their reliable liberal, pro-union political sentiments in conflict with their desire to bring amenities to underserved neighborhoods.

Mayor Vincent C. Gray (D) called Wal-Mart’s move “immensely discouraging,” indicating that he may consider vetoing the bill while pondering whether to seek reelection.

Alex Barron, a regional general manager for Wal-Mart U.S., wrote in a Washington Post op-ed piece that the proposed wage requirement “would clearly inject unforeseen costs into the equation that will create an uneven playing field and challenge the fiscal health of our planned D.C. stores.”

As a result, Barron said, the company “will not pursue” stores at three locations where construction has yet to begin — two in Ward 7 and one in Ward 5. He added that the legislation, if passed, will also jeopardize the three stores underway, pending a review of the “financial and legal implications.”

The bill, known as the Large Retailer Accountability Act, passed the council on an initial 8 to 5 vote last month. The council would need nine votes to override a potential veto from Gray, who lobbied Wal-Mart to open a store at the Skyland Town Center site, near his Hillcrest home.

The Problem With “Living Wage” Laws

In the chicken-and-egg game of “living wages”, few have figured out it is government policies, not salaries that are the problem.

Here are some easy to understand examples.

  1. Hundreds of “affordable home” programs drove home prices higher until home prices eventually collapsed (at which time government bodies did everything they could to prop up prices). Conclusion: Government bureaucrats did not really want affordable homes, they just wanted to be on record as being in favor of the idea (while handing out programs in return for votes and campaign donations)
  2. Student loan programs (and of course education-related public unions) tell a similar story about out-of-control education costs.
  3. Those wishing that government would do something about health care costs need to consider that government is the primary reason health care costs are absurd.

The Real Problem

The real problem is not low salaries but rather how far money goes. Blame the Fed and government policies for that problem, not Wal-Mart.

Should the law pass, it will of course artificially make small mom-and-pop retail stores more competitive, but for whose benefit?

The net effect will be higher prices for everyone, a net loss of jobs, subsidization of weak uncompetitive companies, and a big round of cheers from union sympathizers who will benefit at the expense of everyone else (with the real problem not remotely addressed).

To top it off, living wage laws (coupled with preposterously low interest rates from the Fed) provide further incentives for companies to look at software and hardware solutions to get rid of marginal workers.

Should this inane law pass, it will backfire immediately.

About the Author:  Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.

Unions Defy CEQA Reformers with Taunting Resolution

Despite their reputation as effective and extensive abusers of the California Environmental Quality Act (CEQA) to pursue economic objectives unrelated to environmental protection, California union leaders are strategically choosing to be vocal activists against CEQA reform.

Union leaders are obviously quite confident that corporate executives and the news media will hesitate to make them accountable for their practice.

The State Building and Construction Trades Council of California, the San Diego and Imperial Counties Labor Council, AFL-CIO, and the United Food and Commercial Workers Western States Council are an essential part of the “CEQA Works” coalition organized by the California League of Conservation Voters to oppose CEQA reform. I predict these unions will be the major funding source for broadcast advertising from CEQA Works to undermine reform proposals. (Expect advertising to run soon on these radio stations.)

On February 11, 2013, the leadership of the California Labor Federation, AFL-CIO unanimously approved a resolution stating its commitment to “protecting the critical components of CEQA that have made it effective.” It was presented by the State Building and Construction Trades Council of California.

CEQA documents for proposed solar power plants in Fresno County as of August 7, 2012. A majority of these documents related to union CEQA objections.

This resolution consists of buzz words, emotive language, and facts taken out of context. Many of the declarations provoke laughter at close examination: for example, the resolution praises union “alliances with local businesses” even though small local businesses undermine private sector unionism by operating free of union work rules and not participating in multi-employer union-administered fringe benefit programs.

(This provision probably alludes to CEQA challenges to Wal-Mart supported by the United Food and Commercial Workers union. As reported in the UFCW Local Union No. 135 newsletter of October 2012, “…pro-business politicians in the California State Senate proposed gutting CEQA, making it much more difficult for us to stop Walmart and similar big-box retailers from coming to San Diego and other places in California.”)

But the resolution also reveals that unions know the psychology of their opponents. From their experience in union corporate organizing campaigns, union leaders recognize how business executives strive to protect their professional reputations and corporate images. The resolution is a warning to any corporate executive advocating for CEQA reform who might be tempted to explain publicly why unions oppose it.

Few California corporate executives have the gumption or rhetorical skill to openly challenge an organization supporting benevolent, humanistic impulses such as “smart and sustainable development,” “public health, especially in low-income communities,” and “protecting local communities, strengthening alliances with local businesses, and promoting the creation of good jobs.”

And as an additional defense from accusations of hypocrisy, union officials strategically included a direct accusation in the resolution that “many of the attacks on CEQA are coming from the same corporations that seek to roll back regulations that protect workers.”

Who would dare to counterattack by pointing out how unions use those regulations as a strategic tool to coerce businesses into collective bargaining?

And it’s not just corporate executives intimidated by the aggressive union counterthrust. Reporters, editors, and newspaper executives who dare to expose union hypocrisy are vulnerable to accusations about poor journalistic practices and reporting of right-wing innuendo.

I sent out two Tweets to present the other side of the story:

Unions oppose #CEQA reform – delaying projects & activities is an essential part of organizing strategy in California http://www.phonyuniontreehuggers.com 

Union resolution to oppose #CEQA reform: subtly stating CEQA’s relevance to unions without detailing how unions use it http://www.calaborfed.org/index.php/site/page/1959 …

These missives were tiny beacons of common sense and fiscal responsibility jettisoned into a maelstrom of leftist commentary on Twitter, to disappear into irrelevance.

No one affirmed my comments by citing a CEQA lawsuit filed on January 22, 2013 by the new, shadowy “Fresnans for Clean Air (FRESCA)” in Fresno County Superior Court alleging that the Fresno City Council failed to adequately assess the environmental damage caused by contracting out garbage services. No one asked about the status of the CEQA lawsuit filed on December 14, 2012 by the Laborers Union (LIUNA) Local No. 783 and “Concerned Bishop Residents” in Mono County Superior Court alleging that the Mono County Board of Supervisors failed to adequately assess the environmental damage caused by an upgrade of the Mammoth Pacific Unit 1 geothermal power plant.

Unions dumped these CEQA objections at a meeting of the United Port of San Diego Board of Commissioners on September 19, 2012.

No one mentioned the notorious CEQA document dumps in May 2012 and in September 2012 by the San Diego County Building and Construction Trades Council and UNITE HERE Local Union No. 30 against the proposed San Diego Convention Center Expansion Phase 3. In November, the unions announced “settlement agreements” that failed to address almost all of their environmental objections – including rising sea levels resulting from global warming – even as the unions obtained separate labor agreements for construction and hotel and hospitality services.

One of the declarations in the California Labor Federation resolution asserts that “claims of rampant CEQA litigation are wildly exaggerated since there is an average of only 200 CEQA (sic) per year” and that “only 1% or fewer projects subject to CEQA involve litigation of any sort.” While this statistic is deceptive in many ways, it doesn’t indicate how unions slow down projects using CEQA before ever reaching the point where their law firms need to file a lawsuit. There won’t be a union-instigated CEQA lawsuit to block the San Diego Convention Center Expansion Phase 3 – the preliminary activity under CEQA was enough to win the labor agreements.

The typical tactic used by exploiters of CEQA is “document dumps,” where an attorney submits a huge stack of CEQA objections at the last possible moment, sometimes with meek apologies. As a lawyer in California said to me last week, “The unions are at the point now where they don’t even need to submit comments about Environmental Impact Reports. The union law firm sends a public records request asking for the company’s application for a permit, and the company then calls up the law firm to arrange for a Project Labor Agreement.”

The web site www.PhonyUnionTreeHuggers.com was established by the Alliance for a Cleaner Tomorrow (ACT) in 2012 to document labor union involvement in CEQA environmental objections to proposed projects. Entries are based on actual legal documents that are hyperlinked for reference. The web site also includes the following news articles to show that once in a while, the truth leaks out about union CEQA exploitation:

Protests Over Valley Solar Projects Called a Ploy” – Fresno Bee – April 29, 2012

“Labor Coalition’s Tactics on Renewable Energy Projects Are Criticized” – Los Angeles Times – February 5, 2011

“Debate Brews in California Over Unions And Power Projects” – Platt’s Electric Power Daily – October 29, 2009

“A Move to Put the Union Label on Solar Power Plants” – New York Times – June 18, 2009

“Greenmail: Independent Builders Accuse Unions of Coercion” – Central Valley Business Journal – December 2007

“Union Staffing Demands Dim Market for Solar Panels” (Op-Ed) – Los Angeles Business Journal – October 8, 2007

“Unions Wielding Environmental Law to Threaten Foes” – Sacramento Business Journal – January 29, 2006

“Suits in California Delay Wal-Mart Supercenters” – Associated Press – March 20, 2005

“Pressure by Labor Group Alleged” – Sacramento Bee – September 19, 2004

“Struggle Over Power Plants” – Los Angeles Times – September 6, 2004

“Union Group Comes Under Fire at CEC [California Energy Commission] Workshop” – Energy Newsdata’s California Energy Markets – August 20, 2004

“Roseville OKs Labor Agreement for Power Plant” – Sacramento Business Journal – July 22, 2004

“Unions Push Roseville for Power Plant Pact” – Sacramento Business Journal – July 18, 2004

“No Strong-Arming” – Sacramento Business Journal (editorial) – July 18, 2004

“Unions Have Power Over Energy Plants” – Tri-Valley Herald (San Francisco: East Bay) – March 18, 2002

“Power Grab” (Editorial) – Wall Street Journal – February 15, 2001

“Blame Unions for Blackouts” (Op-Ed) – Engineering News-Record – January 29, 2001

“Unions Play Part in Power Crisis” – Bakersfield Californian – December 23, 2000

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.