On January 1, new minimum wages went into effect in nineteen states. Click here to see the list. The effect of an increased minimum wage remains controversial. How much does it benefit individual workers at the cost of the overall economy?
Ed Rensi reported last week in Forbes that due to these raises, some small businesses have had to close their doors – from daycare centers in Washington to independent eateries in Arizona. Even apparel manufacturers in California join a growing list of businesses leaving the state for less-expensive operating costs.
And still the question remains: what is the real benefit for unions, who have reportedly spent over $70 million funding the Fight for $15 campaign? To some major proponents, like David Rolf, the changing landscape is clear. Traditional unions are on their way out and Fight for $15 is a bridge to evolve with the times.
Rensi argues that while unions may have spent a lot of money on Fight for $15 so far with little return, their business plan is a pretty good one. They expect to see a pretty good return on investment. This could happen in a number of ways.
Some unions have provisions in their contract that if the minimum wage increases in a state, the wages of their members should increase by 15 percent above the new minimum wage. This is the case with UNITE contracts in Pennsylvania, Ohio, and South Jersey. And of course, the more money the workers make, the more money the union makes.
In other cases, unions have negotiated situations where if a company is unionized, they are exempt from the minimum wage law. This makes union labor cheaper than non-union labor. This has actually already happened in Los Angeles. The unionized Sheraton Universal Hotel employees were paid $10/hour. While the non-union Hilton Hotel across the street was forced to pay $15.37/ hour under the city’s hotel minimum wage law.
Due to tactics like these, the EPI has actually estimated that “California unions can expect a return on investment of roughly $9 million in additional dues per year.”