Will Switzerland Save U.S. Workers From a Pyrrhic Victory?

Recently, and much to the chagrin of union leadership in Switzerland, Swiss workers turned a deaf ear to the siren calls for a facially appealing, yet ultimately unsustainable $25 minimum wage. Against the backdrop of global protests for higher wages, Swiss voters overwhelmingly rejected a national referendum that would have created the world's highest minimum wage. Switzerland's rejection of a wage floor was not an act of greed, it was a conscious and economically responsible decision by the Swiss populace to protect their financial interests and economy.

The Swiss vote marks a pivotal moment in the global discussion over economic inequality, and may prove detrimental to President Obama's attempt to increase the minimum wage across the United States. It may also wake up American workers who are foolishly being pushed by their union leaders to the arbitrary and capricious sum of $10.10 selected by President Obama.

To be certain, there are some Americans who would benefit from a wage increase to $10.10 from $7.25 an hour - the current minimum wage. However, if such a pay raise is mandated by the government, rather than a product of the free market, these "fortunate" individuals will quickly realize the fight won resulted in a Pyrrhic Victory. Thus, as these workers bid adieu to their $7.25 an hour salaries, they will be welcoming a plethora of economic problems that may very plausibly arise as a result of a $10.10 floor: loss of benefits such as healthcare, childcare, and pension plans, increased work loads, and most troubling, massive layoffs.

$10.10 might be an aesthetically pleasing sum - which is likely why it was chosen - but it is not actuarially sound.  $10.10 may sound good, but it is doubtful that it is the actuarial optimum minimum wage. That is, the exact point where the minimum wage reaches its apex, which is inherently just shy of the sum that would be a prohibitive expense to employers, subsequently leading to the loss of jobs and/or benefits.

The irony of Mr. Obama's minimum wage hike is that those who stand to gain and those who stand to lose are one and the same. This reveals yet another problem with the President's plan; its motivation. Mr. Obama isn't seeking to reward hard work or increase productivity; rather he simply feels that certain people should make more money. The problem with meritless wealth redistribution is that the results will be inevitably unpredictable, and almost certainly unfair. 

The Obama Administration's strategy is not limited to the minimum wage; virtually every industry is being targeted in an effort to raise employee pay and broaden the category of employees that may qualify for overtime. Employers should be vigilant, and prepared to contend with these proposed changes.

In somewhat of a surprise move, earlier this year the President personally directed the U.S. Secretary of Labor Thomas E. Perez to "modernize and streamline" the Department of Labor's (DOL) "white collar" overtime exemption under the Fair Labor Standards Act (FLSA). While the specifics are unclear, evidentl the White House is focused on raising the minimum salary level, revising the duties requirement for the executive exemption, and refining the definition of a computer professional. Regardless of the ultimate outcome of these changes, it is clear that the end result will be a narrowing of exemptions, thus making more employees eligible for overtime under FLSA. It would be prudent for employers to engage themselves in the rulemaking process in order to minimize the impact on their businesses.

Additionally, the DOL's Employment and Training Administration (ETA) has exercised its rulemaking authority to implement a regulation governing the wage methodology in the H-2B non-immigrant program. This program permits companies to hire foreign workers to perform temporary non-agricultural services or labor in the U.S. on a one-time, seasonal, peak load, or intermittent basis. It also impacts how U.S. workers hired in connection with H-2B applications are paid. The ETA has announced that it will re-issue a proposal that will raise the wages paid to both guest and citizen workers. The net effect of this is that the ETA is seeking to increase wages of workers involved in the H-2B program through regulatory means.

All in all, the Obama administration is making it clear that its agenda is to increase worker pay by artificial means. It is imperative that companies recognize these issues, involve themselves in the rulemaking process when possible, and ultimately prepare themselves for these changes both financially and legally. To not do so would be financially unsound.

Finally, American workers would be wise to learn from their Swiss counterparts and reject government intervention as it pertains to minimum wages. Indeed, it is in the best interest of Americans - much like it was in the best interest of the Swiss - to turn to free-market capitalism and reject the call of the sirens sweetly singing.