Pushing poverty

By Steven Miller
  • Monday, September 13, 2004

Most Nevadans aren’t aware of it, but the Silver State has one of the lowest poverty rates in the country.

In 2001, according to the U.S. Bureau of Labor Statistics and the Bureau of the Census, Nevada had the third lowest percentage of people in poverty of any state.

In 2002—right in the teeth of the post-9/11 collapse in tourism—Nevada still had the eighth-lowest poverty percentage in the country.

What’s behind this outstanding record? One thing: Nevada’s entrepreneur-friendly business climate. In the Silver State, still today, unskilled workers who have the desire to work and learn can walk through opportunity’s door. Day-by-day and step-by-step they can build a life for themselves and their families.

But if the brass at the state AFL-CIO get their way, this record of Nevada success will end. And thousands of marginal, unskilled workers in the Silver State will find the door to opportunity closed right in their faces.

This unfair effort to victimize marginal workers—Question 6 on the November ballot—is being perpetrated by union bosses who’ve been making multiple attempts at deception. One has involved the petition campaign that assured signers that “raising the minimum wage is the best way to fight poverty.” For over 30 years, however, economic research has shown that minimum-wage schemes actually increase poverty among unskilled and marginal workers.

A recent example of such research is the study, The Effects of Minimum Wages Throughout the Wage Distribution, by economists from the National Bureau of Economic Research, the Federal Reserve Bank of Cleveland and the Division of Research and Statistics of the Federal Reserve’s Board of Governors. “The evidence indicates that workers initially earning near the minimum wage are adversely affected by minimum wage increases,” says the study’s abstract. “Although wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income.”

The key fact to grasp is that entry-level employees are paid not only with wages, but also with the chance to learn new job skills. Thus when laws force entry-level wages artificially higher for unskilled workers, their total cost to the company—paycheck plus training costs—will often be greater than those workers bring in. The result is that some workers get let go, and others will never be hired.

Unions know full well this is the effect of minimum-wage hikes. The proof is in the fact that their proposals always keep the minimum wage increase small—one or two dollars. But if their argument for the increase is sound, why are they only calling for a mere $1 increase in the minimum wage? Why not a $10 increase? Indeed, if passing a law is all that’s required to make people prosperous, why not a $1,000 increase?

The reason, of course, is that the more the minimum wage is pushed up, the more employees are victimized. A $1 minimum wage increase mainly hurts unskilled entry-level workers. A $10 increase, however, would also hit thousands of middle-class employees—many of them AFL-CIO members!

In short, as so many times in Big Labor’s past, union bosses here are caught maneuvering disingenuously and discriminatively against some of the weakest and most vulnerable members of society.

Two other items of duplicity are hidden in the union’s proposed constitutional amendment. Although acknowledged nowhere in the ballot proposition, amendment fine print would require that, from now on, wages in Nevada must always exceed the federal minimum wage by at least $1 hourly.

Not only would that suddenly place Nevada at a serious competitive disadvantage vis-à-vis many other states—states without these high wage requirements—but it would especially damage small businesses, which create most new Nevada jobs. Those jobs being non-union, however, the AFL-CIO apparently doesn’t care.

Nevada has long been known as a state where businesses enjoy economic opportunities not found elsewhere. This constitutional amendment, however, would end all that.

One other zinger is buried in the fine print of the actual amendment—but acknowledged nowhere on the ballot: Institutionalized government discrimination against non-union companies—i.e., the overwhelming majority of Nevada businesses. Under the amendment, union officials would get the legal power to permit union companies to hire new employees at rates below the new minimum wage.

This is unfair to both companies and union members. It is also—as the history of New York unions proves—an engraved invitation to union corruption.

Given the AFL-CIO’s entire campaign, however, that’s not so surprising.

Steven Miller is policy director for the Nevada Policy Research Institute.

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