Minimum Wage Politics Suddenly Makes Sense

by Mike on 11/10/2006

in Mob Rule

Not sure why I didn’t know this, but it explains darn near everything about the politics of the minimum wage:

…union contracts are often pegged to the minimum wage…

So the legendary single mom with two kids scraping by on five bucks an hour really has nothing to do with Democrats’ enthusiasm for jacking the rate up every so often. It’s the unions. It’s been the unions all along.

  • Arf

    “Union contracts are often pegged to the mimimum wage” is often repeated, but not very well documented.

    I’ve always wondered why the minimum wage is not indexed to the rate of inflation, the CPI, or something like that. Otherwise, it decreases in vlaue every year until it is raised again along with all the attendent arguments.

  • Arf

    “Union contracts are often pegged to the mimimum wage” is often repeated, but not very well documented.

    I’ve always wondered why the minimum wage is not indexed to the rate of inflation, the CPI, or something like that. Otherwise, it decreases in vlaue every year until it is raised again along with all the attendent arguments.

  • Mike

    @Arf: In just a few minutes of Googling, I can’t find any solid documentation, but I will note that the New York Times stated this to be true last January:

    Many union contracts use formulas, for example, pegging salaries at $20 above minimum wage.

    I invite other readers to submit evidence either way.

    As for pegging a minimum wage to the CPI, there are economic and political reasons not to do this. The economic reason is that it would act as a recursive cycle, reinforcing inflationary trends at a time when they ought not to be reinforced. Also, depending on how it’s written, the minimum wage might actually drop in times of low inflation. [Nevermind. This is probably nonsense. - Ed.]

    Furthermore, the CPI and similar indexes are always subject to manipulation by changing the formula in how they are calculated.

    The political reason is this: automatic minimum wage increases remove the issue as a political football for both sides. Democrats can’t demagogue the issue in election years like this one if it’s automatic, and they can’t get credit for raising the floor if it’s automatic. Republicans also lose because every time the wage is raised they extract concessions of their own before allowing a wage increase to go through.

    Maybe we should tie the minimum wage to Congressional salary increases, eh?

    UPDATE: Also, the Democrats need to consider this question: raising the minimum wage, coupled with lax enforcement of immigration laws and amnesty for existing illegal immigrants, will have what effect on those currently holding minimum wage jobs?

  • Mike

    @Arf: In just a few minutes of Googling, I can’t find any solid documentation, but I will note that the New York Times stated this to be true last January:

    Many union contracts use formulas, for example, pegging salaries at $20 above minimum wage.

    I invite other readers to submit evidence either way.

    As for pegging a minimum wage to the CPI, there are economic and political reasons not to do this. The economic reason is that it would act as a recursive cycle, reinforcing inflationary trends at a time when they ought not to be reinforced. Also, depending on how it’s written, the minimum wage might actually drop in times of low inflation. [Nevermind. This is probably nonsense. - Ed.]

    Furthermore, the CPI and similar indexes are always subject to manipulation by changing the formula in how they are calculated.

    The political reason is this: automatic minimum wage increases remove the issue as a political football for both sides. Democrats can’t demagogue the issue in election years like this one if it’s automatic, and they can’t get credit for raising the floor if it’s automatic. Republicans also lose because every time the wage is raised they extract concessions of their own before allowing a wage increase to go through.

    Maybe we should tie the minimum wage to Congressional salary increases, eh?

    UPDATE: Also, the Democrats need to consider this question: raising the minimum wage, coupled with lax enforcement of immigration laws and amnesty for existing illegal immigrants, will have what effect on those currently holding minimum wage jobs?

  • Arf

    The EPI does not mention unions, but their briefing paper is interesting.

    Minimum wage trends

  • Arf

    The EPI does not mention unions, but their briefing paper is interesting.

    Minimum wage trends

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