Heller and the ALEC by the back door minimum wage issue

Heller 2Yesterday’s post concerned Senator Dean Heller’s (R-NV) decision to support the Republican filibuster of an increase in the federal minimum wage, focusing primarily on the economic effects and the number of Nevada workers who might be immediately affected.  However, there was a second element to Senator Heller’s objection to the measure — that the states should be the ones to raise the minimum wage levels in their jurisdictions.   As if they would?

What might prevent a state from opting to increase the minimum wage?  ALEC.

The American Legislative Exchange Council is actively working toward the goal of enacting legislation reducing minimum wages and overtime pay, or stopping localities from doing the same:

“Since 2011, politicians backed by the American Legislative Exchange Council, which has hit the headlines for previous campaigns on voting rights and gun laws, have introduced 67 different laws in 25 different states on the issue.

The proposed laws are generally aimed at reducing minimum wage levels, weakening overtime protection or stopping the local creation of minimum wage laws in cities or states. Using language similar to “model bill” templates drafted by Alec, they were put forward by local politicians who are almost always Republican and affiliated with the powerful conservative group.” [TRS] (emphasis added)

Eleven of those bits of “model legislation” eventually became law, including in New Hampshire, Arizona, and Idaho.  For state legislators not inclined to do their own drafting, ALEC has conveniently provided a piece of fill-in-the-blank model legislation (pdf) for them.  In fact, according to the National Employment Law Project, ALEC is steadfastly opposed to  (1) minimum wage laws, (2) living wage legislation, (3) minimum wage laws for starting workers, (4) increases in overtime pay.  There is model legislation to preempt state efforts in all these areas. [NELP pdf]

However Jeffersonian Senator Heller may wish to sound about “state’s rights,” the design should be reasonably clear — conservative forces backed by deep pocketed corporate sponsors want to eliminate minimum wage legislation, prevent living wage bills, and preempt state and local efforts to enact protections for working people.  So, from the bully pulpit inside the Beltway, Senator Heller is free to pontificate about the desirability of state leadership in this economic realm BUT the practical effect is to toss the issue back into the state legislatures wherein ALEC can work its magic.

Nothing would please the Austerians more than to play the divide and conquer game — happily believing that lower labor costs will entice enterprises into low wage regions.   If, for example, Nevada were to eliminate its minimum wage, then in combination with other states with such draconian statutes, that would create pressure on other states to do likewise in order to be ‘competitive.’  We know this to be a pie in the sky solution because factors like transportation, infrastructure, work force experience and training, and resource availability are essential in the business location formula.  However, it does create the mixture necessary for a race to the bottom in wages and benefits. Just the sort of thing to make corporate revenues whistle and sing to the analysts.

The second problem with this plan is that while labor costs may be a major factor in manufacturing, they are not as crucial in other economic sectors.  We’ve looked at two types of retail operations before (restaurant and grocery); the important element for these small businesses is speed of service.  Long waits and long lines do not profitability make.   The more labor intensive the enterprise the more labor costs will be a factor, and this is illustrated by looking at the labor costs as a percentage of revenue for sole proprietorships, those little businesses the GOP purports to champion.)

The percentage for food service and bars is 36.74%, for agriculture 37.60%, for construction 53.64%, for health care 77.74%, for manufacturing 38.15%, for retailing 19.40%.  [BizStats]  We can drill down into the retail sector and find that the percentages are 20.43% for clothing stores, 13.66% for food and beverage establishments, and 6.48% for gas stations.   Indeed, for all those little sole proprietorship Mom and Pop stores to whom the Republicans appeal for support — the highest percentage never goes above 35%. [BizStats]

If we draw back and look at a large picture of productivity and worker compensation there’s not much to support Senator Heller’s apparent inclination to race to the bottom there either.

Labor productivity, as defined by output per hour, increased in 63% of the 52 service related and mining industries according to a BLS Study (pdf) using 2011 figures.  “Unit labor costs fell in 11 of 47 service providing industries Unit labor costs declined more frequently in industries where productivity rose, as productivity gains offset movements in hourly compensation.” [BLS pdf]

If productivity is increasing and unit labor costs are decreasing, then why would Senator Heller and his allies in ALEC want to eliminate minimum wage laws and prevent living wage legislation?

Let’s hazard the guess that the impetus to get even more productivity (more work per hour) at even less cost has everything in the world to do with Wall Street and not a heck of a lot to do with Main Street.

Nothing so delights the financial markets as the prospect of creating more “shareholder value” by reducing the inputs — reduced costs for materials, reduced costs for fixed assets, reduced costs for depreciation, reduced costs for employee (read: worker not CEO) compensation.  As the lady once said of the turtles:  It’s earnings reports, earnings reports, earnings reports, all the way down to the bottom.  [CarnegieScience]

And there we have it. It’s workers — racing all the way to the bottom, with no federal minimum wage to underpin their economic security — it’s American workers being told that if their counterparts in China are willing to work for $1.74 per hour then they are being “overpaid” here.  And — with Senator Heller’s state’s rights excuse greasing the downward ramp.

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