Alberta’s NDP, Unions, and the Minimum Wage
June 8, 2015 8 Comments
When analyzing public policy, one must typically ignore stated goals and understand the economic incentives that make groups favor certain forms of economic intervention.
Unions, as a group, tend to favor market restrictions that prop up their higher wage rates.
Alberta’s NDP, led by Rachel Notley, favors unions.
This an important factor in the NDP arguing for a 50% increase to Alberta’s minimum wage, despite protests from the business community and anyone with an understanding of basic economic law. NDP goal to hike minimum wage has nothing to do with helping less productive workers make more income, regardless of what their stated objectives are.
Minimum wage laws are a classic form of monopolistic grants of privilege that benefit some groups at the expense of others. Despite the proclaimed objective of minimum wage laws, which is to increase incomes of the most marginal workers, the actual effect is the exact opposite — it makes them unemployable because they are not sufficiently productive to be employed at the legal wage rates. This means that minimum wages will always cause more unemployment than otherwise — any economist who denies this is either a liar or a fool who doesn’t even understand the basic principles of price controls.
Who benefits from such laws? Certainly not the marginal workers, for it becomes illegal to hire them at the wage justified by their productivity. On the other hand, anyone employed above the minimum wage benefits because their competition is reduced. In particular, unions benefit from minimum wage laws. Unions despise cheaper labor competition. Minimum wage laws remove competition of less productive workers by forcing them to be unemployed.
And there is another reason why unions love minimum wage hikes — it is a devious way to increase their own wages. This can work in many ways depending on the labor agreement. Some agreements trigger mandatory wage hikes when statutory minimum wages increase (because wages are based on a percentage above minimum wage). Others have provisions to open wage negotiations if minimum wages go up.
I am not making this up. Economic theory informs us that we should expect nothing less. But consider also a 2004 study in the Journal of Human Resources by economists William Wascher, Mark Schweitzer and David Neumark. They clearly showed that lower-wage union workers usually see a boost in employment and earned income following a mandated wage hike. And those non-union wage workers who are now unemployed or unemployable? Who cares! The union members already have higher wages and protected jobs. So what if this cruel policy leaves in its wake desperate workers who can no longer legally work?
As for the NDP, there should be no doubt that Premier Rachel Notley is a union hack. Most of her career has been in the service of unions. Consider a few facts from her personal history:
She is married to Lou Arab, a communications and public relations staffer for the Canadian Union of Public Employees[2] and a campaign strategist for the party. She lives with him and their two children in the historic district of Old Strathcona located in south-central Edmonton.[17]
…
After law school, Notley articled for Edmonton labour lawyer Bob Blakely, and went on to work for the Alberta Union of Provincial Employees representing members with Workers’ Compensation cases.
…
She worked for a short time for the National Union of Public and General Employees (NUPGE),[20] worked at Athabasca University,[21] acted as volunteer co-ordinator for the Friends of Medicare “Romanow Now” campaign, and finally as a labour relations officer for the United Nurses of Alberta.[1]
Can there be any doubt that Notley will seek to benefit her union friends at the expense of other groups in society? Of course not.
Rachel Notley and the NDP are looking to empower unions. They don’t care if they hurt society’s least productive workers, like teenagers, people with disabilities, workers with language barriers, anyone without much experience for any reason, and ethnic or racial groups that may face discrimination.
Some will argue that forcing minimum wages higher makes employers invest in more equipment and develop new technology and this will increase productivity of labor. Therefore, this improves the economy. But this is a silly argument. Capitalists are always seeking ways to increase productivity, so to think they are just sitting around waiting for the government to force price floors on labor to do so is a joke.
But even assuming the employer doesn’t just reduce his quantity of labor demanded, his investment in new capital is limited by savings in the economy. Increasing minimum wage does not increase the total supply of capital available. If anything, capital will merely be shifted from some industries to others in an attempt to offset an artificially higher cost. Capital is not being reallocated because of a market requirement, and so this is not an economic improvement.
Don’t be fooled by anyone who says they want to increase the minimum wage to help the poorest workers. The main concern motivating the NDP to increase the minimum wage is helping unions.
Anyone advocating a higher minimum wage should be ridiculed and shamed out of public office on account of sheer ignorance.
CANADIAN MARKET REVIEW 
Pingback: Local McDonald’s Is Ready for Minimum Wage Hikes | CANADIAN MARKET REVIEW
I know this but this article should have been circulated for those who don’t prior to the election.
Pingback: Alberta’s NDP, Unions, and the Minimum Wage – Eat Dirt Media
The policies of Rachel Notley and the NDP are only going to result in higher unemployment in Alberta. This has happened in every province governed by the NDP and Alberta will be no different. There is a petition being circulated to force the NDP to dissolve the legislature and call a new election. I would advise everyone who opposes the NDP’s tyrannical reign to sign it.
Dale, I would categorically reject such a ludicrous petition. Albertans should instead be looking at a more organized social economy. The NDP can’t – by itself – get Alberta’s workforce upgraded to a Norwegian or German level, without many sectors of society taking a hard look at the irrationality of allowing the hijacking of the economic interests of the people with the laissez faire model – that abdicates responsibility of development of society to private market forces. This foolish and slovenly philosophy has undermined the whole North American economy.
One area that I would recommend initiating action is in the pharmacology area. The Valeant and Shkreli examples of this past year show the logical results of allowing leverage-buyout hedge funds to plunder fully-cost recovered drug companies – purely for maximization of profit in the short term.
Consider what would be the outcome of if graduates of the biological sciences had an option of joining a worker co-op…This is where freedom of information and open inviting of collaboration is encouraged. The idea that proprietary secrecy is the only value that is allowed in the workplace – under the private plunder model – would be abolished. Instead, the interest of furthering the sciences and the interests of patients would predominate. When a discovery was able to effectively eradicate vestigial cancer cells instead of merely suppressing them – as most of the standard of care approaches are intended to do – then the shop floor decides on what further areas of commerce the group decides to enter. The private short term interest model, by contrast, just cuts staff they see as redundant.
What I am saying is not some fantasy. Right wing dogmatists need to be educated. Look at the effects of worker co-ops in a country like Spain. Its economy has been in Great Depression levels for the past few years due to the monoculture of the Bank for International Settlement pathological idea that governments must only borrow from private lenders. One region of Spain, the Basque area, where the Mondragon Co-op is based, had a net gain of 1000 jobs in 2014. The social economy is not some woolly idea of impractical communards as the right would pretend. It is economic democracy in practice. Democracy has been under-appreciated in recent decades, and from an investment perspective it is time to be contrarians and start going beyond the Thatcherite myths. https://www.bing.com/search?q=mondragon+1000+more+jobs+in+2014&pc=MOZI&form=MOZTSB
I think there is more to it than the unions, benefitting from this. Income tax, is increases because 26% of $15/hr is more than 26% of $10/hr. A benefit to the government. Now that you cannot afford to tip your servers when dining out. There is no worry of trying to regulate the tax they earn on tips, it’s covered off in the wage hike. Another win win for the NDP. Things aren’t allways what they appear to be especially with our NDP .
Typical of a hack for the richest, who don’t want to pay a living wage, to blame those who organized and fought for their fair wage, for unemployment. Does anyone think that a company like McDonalds, some stores earning more than $ 20 000.00 per day, can’t afford a few more pennies for their workers? I wonder when the last time the writer of this article had to live on minimum wage?
With all the talk about economic theory put forth in this article, perhaps we should examine this one more closely – More money in the pockets of people means more spending, which means more profits for those same companies. People forced to live on almost nothing spend very little. People who are forced to live below the poverty line become desperate – willing to do anything for any amount of compensation. Who benefits from keeping people in poverty? Any idiot can see this does not benefit the Unions, or society, or democracy, or anyone else except the very wealthy.
If your argument is correct and higher minimum wage is so great, why not make the minimum wage $100/hr? After all, “more money in the pockets of people means more spending, which means more profits for those same companies.” If $15 is so great, then $100 has got to be way better!