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The Slipperiest of Slopes: Immigration ‘Compromise,’ A Really Bad Deal In Any Economy

Although details are still somewhat sketchy at this point, based on press reports, it appears that AFL-CIO boss Richard Trumka and the U.S. Chamber of Commerce head Thomas Donahue reached a deal Friday night on immigration reform.

If, by what is being reported, the deal reached on low-wage immigrants is true, the impact on the private sector–and, thus, the economy–may be profoundly and negatively impacted for years to come as the deal reportedly establishes premium wage prices for those employers who traditionally employ low-wage immigrants.

Unemployed - Le Haricot
The issue of whether there should be wages mandated in immigration reform for low-skill, low-wage immigrants had been a sticking point for a couple of weeks.

However, based on what is being reported, the new deal reached between the AFL-CIO and the U.S. Chamber will require that employers who use low-skill immigrants pay “actual wages paid to American workers or the prevailing wages for the industry they’re working in, whichever is higher.” [Emphasis added.]

To most, the term ‘prevailing wage’ sounds innocuous.

In reality, however, this approach will prove disastrous. Here’s why:

The term ‘prevailing wages’ is actually a term that applies to contractors that do public works–usually in the construction industry–under the 1931 Davis Bacon Act.

Based on Prevailing Wage.- The minimum wages shall be based on the wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed, or in the District of Columbia if the work is to be performed there. [Emphasis added.]

In practice, ‘prevailing wages’ are most commonly akin to union-level wages (and benefits) and are dictated by the Department of Labor.

Under Friday’s compromise, employers who use low skilled workers will be forced to pay the government-mandated prevailing wage–even though they are not government contractors.

On its most basic level, this is the government requiring private sector employers who choose to employ low-skill immigrants to pay what amounts to be “union scale.”

More importantly, Friday’s compromise does not just apply to the construction companies who do government work it applies to a myriad of private-sector industries that do not do government work.

According to the Huffington Post:

The AFL-CIO and the Chamber had been fighting over wages for tens of thousands of low-skilled workers who would be brought in under the new program to fill jobs in construction, hotels and resorts, nursing homes and restaurants, and other industries.

According to the L.A. Times, housekeepers and landscapers would also be covered under the prevailing wage compromise.

In practical terms, this means the following:

  • A landscaper who uses migrant workers will likely end up paying wages that are based on a Laborers’ union contract. The pension and benefit costs* (usually around 40% on top of wages) would also be paid out to employees.
  • A nursing home operator would be required to pay what a SEIU and/or AFSCME contract nearby dictates, also with the equivalent health care and pension costs* being paid out.
  • A hotel operator would pay housekeepers what the nearest UNITE-HERE contract dictates
  • Similarly, a mom and pop restaurant would also pay “union scale” to its kitchen staff.
  • A residential home builder would be required to pay general laborers, roofers, concrete pourers, and other low-skill construction workers what the union scale would be for the respective trades.
  • and, the list goes on…

* Note: Under the prevailing wage law, if a union-free employer does not have a pension plan or a health plan that is similar in costs to a union plan (the amount dictated by the Department of Labor), the employer must take the amount that would be contributed to those types of plans and pay them to the employee.

Currently, in the construction industry, while the total compensation costs dictated by prevailing wage laws are high, they also often serve to thwart union organizing attempts for union-free contractors as union-free workers typically take home more in pay than the union worker in prevailing wage jobs—and their money is not put into union pensions that are mostly underfunded.

The fact Big Labor and Big Business have reached a compromise that imposes prevailing wages on the private sector should not sit well with anyone.

Immigrants…
To avoid paying prevailing wages, many employers will look for ways not to hire immigrants. In some areas, this will cause a shortage of workers and employers will naturally have to raise wages to a certain level to attract workers. However, as long as they can attract non-immigrant workers at a price below the prevailing wage, it would still be a cost savings as compared to paying prevailing wages. Who loses in this? The immigrant workers.

Unions…
If some employers do end up paying prevailing wages, when unions (and their members) realize non-union workers are making the equivalent of what they negotiate into union contracts, in most cases, there will be nothing for them to sell the union-free workers. In fact, this will be a deterrent for union organizing**.

** Why would a non-union worker pay union dues, when (s)he can get the same (or more) without a union? [Union organizers, don't say you weren't warned. This will be used against you in your quest for new members.]

Employers…
If employers end up being forced to pay artificially-inflated prevailing wages for low-wage workers, they will be forced to pass along their costs to their customers. In many cases, for those employers who can raise their prices, many of those customers will be the general public who will see prices increase in nearly every area where goods and services are now purchased from employers who employ low-wage workers.

Hotel prices will increase.
Fast food prices will increase.
Residential home construction will increase.
And, the list goes on…

None of this is good for stimulating the economy. In fact, it will be harmful.

Worst of all, in an economic system built on a quasi-free market, to have the federal government dictate what wages will be paid in the private sector and, worse, to dictate that said wages will be an above-market, premium wage is but one more nail in Capitalism’s coffin.

At a minimum, it’s a recipe for disaster.

The AFL-CIO, Chamber compromise is a bad deal all the way around.

[It would be negligent not to mention that this is the same scheme Barack Obama and union bosses used to kill immigration reform in 2005 and 2007.]

_____________________
“Truth isn’t mean. It’s truth.”
Andrew Breitbart (1969-2012)

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