John Locke Update / Research Brief

Progressive Recommendations Would Harm, Not Help, Hourly Workers

posted on in Economic Growth & Development, Economics, Human Flourishing, Rights & Regulation
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  • A new report published by a left-wing group included policy recommendations they claim will help hourly workers
  • The recommendations, however, largely introduce more restrictions, costs, and burdens to hiring hourly workers, which leads to less hiring
  • A better recipe to help hourly workers would be to peel back layers of government meddling in the labor market, not introduce more layers

In an alleged attempt to advocate for North Carolina workers, a recent report published by a left-wing organization would end up making workers worse off.

The report, entitled “Our Daily Bread: The Hourly Workers Package,” includes six recommendations that would dry up opportunities for low-skill and working-class households. Produced by a group called Carolina Forward, the report should be roundly rejected by any legislators or community leaders who care about creating more and better opportunities for those on the margins of employment.

Below are the six recommendations, along with analysis to demonstrate how they would harm, not help, the very low-wage hourly workers the study purports to benefit.

  • Raise the minimum wage to $15/hr. Minimum wage increases don’t create a single job; they merely outlaw them. With a current legal minimum wage of $7.25/hr, this move would more than double the minimum wage. Such a move, of course, would price the state’s lowest-skilled workers out of the workforce. It’s basic supply and demand. Raise the price of something, including low-skilled labor, and the quantity demanded for it will fall. Fewer jobs will be available.

    Also, at a higher wage, there would be more willing to supply labor. At $15/hr, more people would apply for such minimum-wage jobs, more of which would have higher education and skill levels. This influx of demand would crowd out the lower-skilled workers.
  • End “wage theft.” A scenario of “wage theft,” according to the authors, is “When employers do not pay their employees the wages they have rightfully earned.” As such, the employers are “misappropriating property that belongs to those workers.” With this description, one wonders about the authors’ opinion about taxes. In any case, examples of “wage theft” provided in the report include requiring “off the clock” work, rounding down the hours worked, and not paying promised wages like earned vacation pay and commissions.

    There’s no question that employers not living up to their agreed-upon terms is problematic. The main remedy offered for this problem is to beef up investigation and enforcement of “wage theft” complaints by the state’s Department of Labor. The drawback, however, would be employers reducing opportunities for added benefits, like overtime or vacation pay, for fear of reprisal from a disgruntled employee.

    Creating a more competitive labor market by reducing government favoritism, restrictions, and mandates would improve employer treatment of workers better than increasing threats of punishment that would discourage the offering of added benefits in the first place.
  • Fair scheduling and leave. Many hourly workers receive very little notice of their upcoming work schedule, which can create hassles, especially for parents. The solutions offered in the report include requiring extra pay for “last minute” scheduling changes and mandating higher wages for employees whose schedules are “permanently subject to last-minute changes.” Once again, instead of threatening to punish employers for exercising an option they may find of value (namely, flexible scheduling), a more competitive labor market would enable employers to compete to attract the best workers by offering a menu of benefits, one of which could be more predictable worker schedules. Mandating it would just impose an added burden on employers, and any added burden can discourage hiring.

    The report also recommends government mandated paid leave and breaks. Like the minimum wage, such a mandate would raise the cost of employing low-skilled workers, which would result in fewer of them being hired.
  • Fix unemployment insurance. By “fix,” the report of course means make unemployment benefits more generous. Left out of the report is how the more generous benefits would be paid for, which would be through higher UI taxes on employers. Higher taxes on employers would leave less money for them to pay higher wages or hire more workers. And creating higher subsidies for unemployment would create still more unemployment while incentivizing people to stay out of the workforce longer. The longer someone is out of the workforce, the harder it is for them to re-enter it. The result: fewer job opportunities available for a growing number of unemployed workers with fading skill sets.
  • Unlock worker mobility. Here some credit is due. Included in this section is a recommendation to reduce the number of professions requiring occupational licenses. This is a policy the Locke Foundation has been advocating for years. Also in this section, however, is a recommendation to ban noncompete clauses, especially for hourly workers. Noncompete clauses typically involve the employer agreeing not to work for a competing business for a certain amount of time upon leaving the company.

    Employees, however, can often demand higher pay in return for signing the noncompete clause. Moreover, this seems like a solution in search of a problem. It is hard to imagine enforcement of noncompete clauses is very frequent for low-skilled hourly workers. A busy McDonald’s manager is unlikely to have the time and resources to track the whereabouts of all her former cashiers and fry cooks. Banning noncompetes would mostly take away another option from employers, leading to more hesitancy in hiring.
  • Strengthen worker voices. This means overturning North Carolina’s right-to-work (RTW) laws, which would allow unionized workplaces to force employees to join the union as a condition of employment. Granting unions such powers of compulsion over workers is appalling, especially in a report claiming to champion workers. Moreover, right-to-work states perform much better economically. For instance, “Private sector employment grew by 27 percent in RTW states between 2001 and 2016, compared to 15 percent in non-RTW states,” according to research by NERA Consulting. The research also found that “Personal income in RTW states rose over ten percentage points more than in non-RTW states between 2001 and 2016, 39 percent versus 26 percent.” In short, maintaining, not abolishing, North Carolinians’ right to work would mean more jobs and bigger paychecks for workers.

Conclusion

In sum, like so many issues, progressives’ default setting for every real or perceived problem is more government interference in the relationships and associations of citizens. In this case, they want to interject more mandates and restrictions in the employee/employer relationship.

Upon further examination, however, we find that their recommendations would primarily harm workers, not help them, through fewer job opportunities and lower wages. The best recipe for more opportunities, higher wages, and better treatment for workers is to peel back government meddling in the labor market, not to introduce still more of it.

Brian Balfour is Senior Vice President of Research for the John Locke Foundation, where he oversees the organization’s research and analysis on a variety of issues. He previously worked for the Civitas Institute for 13 years, and has a master’s… ...

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