Whenever politicians are considering an intervention in the economy, you should always ask “who benefits from this increase in government?” The pro-regulation side will always have an answer like “customers,” “workers,” “the environment,” and of course, “the children.”
But the regulation usually only goes into effect if there’s a powerful special interest that stands to gain politically or economically or both.
So it is with the minimum wage.
One class of beneficiaries is the larger employers whose size or business model makes it easier for them to pay higher wages or deploy robots. They can afford the forced pay hike or the electronic kiosks and software in a way Mom & Pop cannot. This helps explain why companies like Walmart, Costco and Panera often support a hike in the minimum wage.
A second class of beneficiary is the higher-skilled worker who already makes more than the proposed higher minimum wage. Currently, employers can choose between the more skilled and more expensive, or the less skilled and cheaper. If you outlaw low wages, there’s not really much of a choice to make.
This dynamic, of course, also benefits the labor unions, which crush their nonunionized competition in the labor market, and thus collect more dues and gain more bargaining power.
What the Costcos and the unions are doing in the above situation is a standard ploy in the world of political economy — the Regulate Me! ploy. You advocate regulations that you can afford but your smaller competitors can’t afford.
But California’s labor unions aren’t even doing that this year. The $15 minimum wage they’re advocating — they don’t want that to apply to union workers, the L.A. Times reports:
Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.
In other words, unions aren’t lobbying for higher wages for workers — they are lobbying for monetary punishments on nonunion workers and nonunion employers.
