Prop. 202's Nasty Surprises

Posted on October 09, 2006 | Type: Op-Ed | Author: Thomas C. Patterson
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Prop. 202, the minimum wage initiative, would raise the statewide minimum wage from $5.15 to $6.75 per hour. Proponents don't talk much about the other provisions in the proposition, which is understandable. There's some pretty nasty stuff in the small print.

The legal minimum wage, in principle, is government interference with our individual rights to contract with each other. If I need a job and you want some work done, we should be able to voluntarily enter into an employment contract with mutually agreed upon terms.

This is America. Why should government prohibit a student willing to take a low-paying internship in order to enhance his career? Especially since volunteering, working for no pay at all, is perfectly legal.

Advocates claim minimum wage legislation is needed so that no working people need live in poverty.

Forcing employers to pay workers more than the market value of their labor is even said to be economically stimulating, since lower income workers necessarily spend a higher proportion of their income. It would be wonderful if the world actually worked like that. We could require employers to pay $40 or $50 per hour and poverty would be abolished.

Back in the real world, though, artificially raising the price of labor above its actual value has consequences that aren't wonderful at all.

Employers naturally seek ways to avoid hiring such workers, such as hiring fewer but more productive workers, automating or deleting services. As a result, the job pool for entry-level workers shrinks.

There are, as always, studies on both sides but about 90 percent of economists agree that raising the minimum wage causes job loss. This is particularly hard on minority youth, whose obstacles to employment are often formidable.

But Prop. 202 also exemplifies an unfortunate new trend in Arizona politics. Initiative writers with a popular cause have come to realize they can include stealth provisions in their text that will escape public notice - until the election is over and it's too late. The Clean Elections initiative was notorious in this regard. Voters responded to the opportunity to take "special interests" out of elections.

Most didn't even realize the scheme was to provide taxpayer funding of campaigns. Only too late did Arizonans discover that the 20 pages of fine print they had approved included unfair matching provisions, ludicrously generous tax credits and an unelected commission which makes and enforces the rules governing campaigns.

There should be a voter alert on Prop. 202. Proponents claim, for example, that small businesses are excluded by reference to a provision in federal law 29 U.S.C.A. But according to a legal analysis by Gregg J. Tucek of Sherman & Howard LLC, the referenced federal law exempts no one and requires all employers engaging in commerce to pay minimum wage. Small businesses, generally agreed to be most likely to suffer economic damage from minimum wage legislation, actually get no protection at all.

The "employers" affected by Prop. 202 may not be only businesses either.

The law also targets "individuals" and "other entity acting in the interest of an employer." So if you hire people to help with house or yard work or employ a nanny, you would be personally liable under this law, even if you don't pay them directly.

Why not just pay sufficient wages and avoid trouble? It might not be that simple. This law states you will be presumed to be in violation if you fail to keep accurate wage records for four years. Further, you could also be required to put a notice in the "workplace" informing the workers of their rights.

It goes on. Not only your employees but "any other designated representative," including unions and special-interest groups, are permitted to file complaints anonymously.

When they do, you are required to let them inspect and copy all payroll records. The commission charged with enforcing the law has carte blanche when a complaint is filed, to also inspect and copy any "other business records," whatever that means. So much for privacy and confidentiality.

Employers, personal or business, are not permitted to "hinder an investigation" which would seem to preclude attempts to defend yourself legally. Finally, if you violate recordkeeping, posting or other requirements, you would be liable not only for unpaid wages but "any other ... relief" the commission or courts see fit to impose. There's more, but you get the idea. Prop 202 is unreasonably punitive and vindictive towards those who provide jobs. Let's not let this one slip in under the radar.

The Goldwater Institute does not support or oppose specific legislation, but adheres to its educational mission to help policymakers and citizens better understand the consequences of government policies.

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