Labor gangsterism—mob-run labor unions that loot pension funds, make back-room deals with both politicians and companies that favor union management over workers, and support crooked big city machines as part of a strategy to keep law enforcement at bay—is one of America’s oldest union traditions. How important has the mob been in labor history? Ask Jimmy Hoffa, if you can find him.
Now, a recent rash of minimum wage laws have created a huge new opportunity for mafia enrichment: laws that hike the minimum wage to utterly unrealistic levels, but allow companies to pay less than the minimum wage—if the low wages are part of a collective bargaining agreement with a labor union.
More than 20 U.S. cities and counties, recently including Los Angeles and Kansas City, Mo., have set minimum wages above state and federal levels. Some will eventually reach more than twice the federal rate of $7.25 an hour.
In at least a half-dozen of those communities, the pay-floor ordinances include a provision allowing unions to waive the wage mandates as part of a collective-bargaining agreement.
Why, you might ask, would a labor union that is supposedly dedicated to increasing the wages of its members be willing to sign a deal that allows workers to earn less than the minimum wage the union has campaigned to pass into law? The unions have said it gives them more flexibility in negotiations and shields employers and cities against lawsuits. But the real answer, silly, is the exemptions create an incentive to force companies like hotels and fast food chains to recognize labor unions precisely so they can keep labor costs down:
For instance, business groups say, unions could advise companies that if they agree to labor representation, they can avoid paying the minimum wage, spending less on wages overall. The strategy could let unions bolster their ranks at a time when union membership is falling, business groups say.
The unions get more members, more dues, and a greater ability to extort sweetheart deals from employers, the workers “get” lower wages along with the “right” to pay union dues, and the companies save money overall by agreeing to pay off the Jimmy Hoffas and Tony Sopranos who will “represent” the workers and offer management deals that it cannot refuse.
In other words, empowering labor unions to strike sweetheart deals with employers is a way to divert money from workers to union bosses. Some of the unions backing these measures are run by well-meaning people who are looking for ways to build labor’s institutional power at a time when globalization, immigration, and automation have made traditional unions less relevant than ever in the private sector. But these measures will attract the wrong people back into the union business and create incentives that make unions attractive targets for mob power. (Not that anything like this could ever happen, say, to the casino workers’ unions in Las Vegas.)
Minimum wage laws like the ones adopted by so many financially challenged blue cities recently are job killers that force ordinary working people into dependency, creating a large group of people who can’t get work at the artificially inflated pay rate and so depend more and more on politicians to give them the handouts without which they cannot survive. For their part, businesses need exemptions from regulations and taxes that would otherwise kill them, and under these labor loopholes, are forced to cut deals with union bosses to stay in business at all.It’s a recipe for civic suicide, but it helps a parasitic class of union bosses and political bosses and crooked single party political machines stay in power.
One way to stop that would be for state governments to intervene and outlaw minimum wage laws that offer labor loopholes. There should not be two classes of workers in American states, and private organizations like labor unions should not be able to grant exemptions to public laws.