02.28.2010 0

The Living Wage Illusion

  • On: 03/26/2010 09:50:49
  • In: Big Labor
  • By David Nace

    Like so many other concepts promoted by the left, self-proclaimed progressives and their allies in organized labor have used the term “living wage” to mislead the public and justify government intervention in this case on behalf of organized labor. While the term “living wage” evokes sympathy and sounds innocuous, the real objective of the “living wage” in the eyes of organized labor is to use the coercive power of the government to unionize millions of new workers at the expense of the taxpayer and the American economy.

    Progressives utilize government intervention to enable workers to receive far more than market value for their services through labor union coercion and collectivism. The “living wage” concept is closely related to the Marxist theory of surplus labor. Marx used surplus labor theory to create class envy and create the illusion that workers could never receive the fair value of their efforts. He used this concept to justify a violent overthrow of capitalism and replacement with worker run communism. However under communism, workers were constrained to lives of misery in support of Communist Party officials.

    Historically, government promotion of a “living wage” has produced something entirely different for the vast majority of Americans. During the first 100 days of FDR’s presidency, he used the financial crisis to extend or enact many of the programs that progressives had tried to enact since the Wilson administration. One of the most important of these programs was the National Industrial Recovery Act. The act extended the voluntary government and industry cooperation created under Herbert Hoover to keep wages and prices high. It produced thousands of pages of regulations dictating products that business could sell and the prices they could change. In exchange for allowing unionization of their companies, large manufacturers could form cartels to set artificially high prices for their products. The effect of this act was to greatly increase unemployment by keeping prices and wages extremely high and ultimately prolonged the Great Depression by 7 years.

    During the 1970’s, inflation was rampant in no small part due to the pattern bargaining and cost of living adjustment (COLA) provisions written into contracts in the auto, steel and other heavy industries. In a time before global competition, labor unions in these industries were able to impose the provisions negotiated with one company upon the rest of the industry. In addition, as the cost of living went up, the COLA provisions automatically increased their wages. It took the actions of Paul Volker at the Federal Reserve Board and rise of global competitors to end this inflationary spiral.

    Because businesses that are forced to pay higher than market labor rates do not expand, private sector unionization has dropped to 8% of the work force. However, the wages and benefits that they have been able to obtain are far beyond a “living wage”. The management of General Motors and Chrysler must share the blame for their company’s demise, however, it is very difficult for GM and Chrysler to be competitive with a wage and benefit cost of $75.00 per hour when the cost at Honda is $43.00 per hour.

    The greatest opportunity for progressives to utilize government intervention to promote a “living wage” has been in the unionization of government employees. Even the patron saint of progressives, FDR, was able to recognize the fundamental conflict of interest in allowing government employees to organize and strongly opposed it. It was not until President Kennedy signed Executive Order 10988 that public employees could form unions.

    There is a reason that Andy Stern, head of the SEIU, has been such a frequent visitor to the White House. Although he is not registered as a lobbyist, he is there lobbying to make sure that every program that the Obama administration enacts benefits organized labor, especially the SEIU. So far he has been successful. A large portion of the 787 billion dollars of the Stimulus Act will preserve public sector union jobs at the expense of state government budgets when the stimulus funds end. Other portions of the bill will ensure that only union workers are able to work on infrastructure projects.

    As a result of public sector unionization, public employees earn far higher wages and enjoy much more extravagant benefits than workers in the private sector. Since 2000, salaries of government workers have increased by 54% while salaries in the private sector have increased by only 28%. This disparity is most profoundly illustrated in the Bureau of Economic Analysis Data for wages and benefits of Federal Civilian Employees and private sector employees. Between 2000 and 2008, the average total compensation for Federal employees grew from $76,000 to $120,000 while the average total compensation in private industry grew from $46,000 to $60,000.

    While progressives claim that government support of unions is essential to ensure that workers receive a “living wage”, the reality is that unionized industries in the private sector receive far beyond a living wage and the highly unionized public sector receives wages and benefits double that of the private sector. Like so many other concepts of the left, the living wage is more propaganda than fact.

    David Nace, an Executive Vice President of a Pennsylvania construction and engineering company, is a Liberty Features Syndicated writer for Americans for Limited Government.


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