I was reading the comments on minimum wage from wjames89 ‘s post “Minimum wage needs to be Increased” and I thought it was interesting that many of the states that people say have a minimum wage that is above the federal wage are unionized.
Unions always support an increase in the minimum wage; it makes them look like they support the poor and that creates support for labor unions. Plus, unions are organized so that they can be politically influential.
In reality Unions are creating another safety net for their members: they are out pricing their closest competition.
Think of it like this:
Bob is a member of a manufacturing union, he has a high school degree and no higher education but he has been working for Cars Inc for the past year. Bob gets paid eight dollars an hour.
Fred has a high school degree, but no experience and no job. He is willing to work for $3.
Cars Inc gets into a spot of trouble and needs to cut costs. Fred will work for three dollars per hour, and training will cost three dollars per hour. So Cars Inc decides to fire Bob and hire Fred, because Fred will only cost $6 per hour to employ. Bob and Fred are almost exactly the same, except Bob has one year of experience and Fred costs $2 less to employ.
Now, if there is a minimum wage or $5 per hour then Fred costs $8 per hour to employ and Fred has no experience. So Cars Inc will not lay off Bob and hire Fred.
So a higher minimum wage decreases competition for organized labor by raising the cost of the next best alternative.
Intriguing. I never considered this.