The 'Living Wage' Gambit

As a candidate, New York Mayor Mike Bloomberg sold voters on his willingness to defy the city's traditional power brokers, the unions. It hasn't taken long for Big Labor to test his mettle. Last week the City Council held hearings on a "living wage" bill, which in New York translates to an inflation-indexed $10-per-hour minimum-wage requirement for any business having even tangential contact with the city or other public agencies. Union thumbprints are all over the proposal.

Living-wage laws have become a national fad. Proponents claim victories in more than 60 jurisdictions since 1994 and 75 campaigns are currently under way, according on one count. A typical ordinance sets the wage floor at $8 to $10, but some have been more generous. Last year Santa Monica, California, mandated a minimum hourly rate of $12.25 for anyone doing business with the city.

Advocates say the working poor stand to benefit from these laws, and they do -- but only the ones who are lucky enough to keep their jobs. The economic reality is that living-wage requirements raise employer costs, and the first to go are low-skill workers. As the 1990s showed, the working poor benefit most from economic growth and a booming job market that opens more opportunity.

The real living-wage beneficiaries are the labor unions backing the movement, and they're not shy about their motives. An AFL-CIO newsletter tells members that "living-wage campaigns are part of an overall strategy" that will "potentially enhanc[e] union organizing among workers." The game is to fashion the ordinance into an effective recruitment tool, the better to force businesses into collective-bargaining agreements. These laws also limit competition for city contracts; private contractors who can't handle the political pay scales are priced out of the bidding.

The New York proposal has these goals in mind and then some. E.J. McMahon of the Manhattan Institute says there's talk of including a "private right of action" in the bill, which would turn unions into highly selective prosecutors who could threaten a lawsuit if a business didn't agree to their terms. "As opposed to requiring the city to enforce the law, a union could go to court and claim that someone is in violation of the law," says Mr. McMahon.

Dennis Rivera, the powerful head of New York's 200,000 member health-care workers union, lurks in the shadows here. In January his union endorsed Republican Governor George Pataki for re-election in return for a pay raise. For the scheme to work, however, Mr. Bloomberg, who as mayor plays a role in the dispersal of state funds, must be on board. Mr. Rivera wants a living wage just in case the Mayor tries to upset his deal with the Governor. Mr. Rivera didn't put Mr. Bloomberg in City Hall, but many Council members have the union boss to thank for their seat. If he wants a living-wage bill, he'll probably get one.

That's bad news for New York, which is already the most expensive place in the country to own and operate a business. "New York City [has] difficulty enough attracting business," says Kathryn Wylde, who heads the Chamber of Commerce. "Living wage is simply another disincentive."

So far, City Hall has opposed the measure. At last week's hearing, Deputy Mayor Dan Doctoroff noted that New York has lost 136,000 private-sector jobs in the past 14 months and faces a $5 billion budget deficit. The city estimates that a living-wage bill would cost $143 million in 2003 and more in later years. Unemployment is at its highest level since 1971.

We wish Mr. Bloomberg well but realize that the odds are against him. Still, New Yorkers should know who's to blame for the economic damage done by union bigwigs protecting their own.

Updated April 28, 2002 5:35 p.m. EDT