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Blocking Labor Department Wage Rule Condemns Young Americans to Unemployment

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Most Americans would rightly scoff at the claim that landscaping companies can't find workers here in the U.S. and have to go abroad to find them. Many of us mowed lawns, weeded gardens, trimmed hedges, planted flowers and raked leaves as kids, and we know that this is work that can be done by most teenagers and healthy adults. It's obvious that there are hundreds of thousands of potential landscaping workers among the 13 million unemployed, especially if they were to receive the prevailing wage, which averages about $12 an hour across the country.

But few of us have ever worked at shucking oysters or picking crab meat, so the idea that seafood processing companies might have trouble finding workers willing to do such hard, dirty work for minimum wage is plausible. But what if those companies offered higher pay? What if they offered $10 an hour or $12 an hour, instead of $7.25? It's possible they would get enough workers, but the companies claim it would raise the price of their products beyond what the market can bear. But would a smaller pay increase -- for example, $2 an hour -- be both enough to attract U.S. workers and keep prices competitive?

Or what if we cast the recruiting net a little farther? Rather than the company merely advertising in a local newspaper for a couple of days, what if we had the Labor Department use the Internet to advertise the jobs nationally and search for able and willing unemployed workers nationwide? If workers are willing to come to Maryland's Eastern Shore from Mexico, can't we find unemployed workers in Florida or South Carolina willing to travel a much shorter distance in order to earn a few thousand dollars?

Unfortunately, such questions are never asked (at least publicly) by the seafood industry or its advocates in Congress. Instead, without trying such solutions, they simply assume that nothing can be done to persuade U.S. workers to take these jobs (even though many U.S. workers actually are doing them -- after all, every currently employed seafood worker isn't a foreign guest worker). If nearly half of Maryland's seafood companies can operate without guest workers, isn't it possible that the others, with some help, could also find U.S. workers?

The academic work the industry and its allies cite to support their efforts to get more guest workers simply assumes there are only two stark choices: providing all the guest workers the companies want while paying them minimum wage, or shutting down their operations and laying off their entire workforce. The academic report most cited by the seafood industry is a two-page brief by Douglas Lipton of the University of Maryland. He asks the question: "If we assume that H-2B visa workers (foreign guest workers) cannot be replaced by domestic workers," what would happen if there were no H-2Bs? His answer, obviously, is that production would fall, revenues would fall, and jobs would be lost.

But that's the wrong question, or at least an unhelpful one, if we are looking for a policy that fairly balances the need of U.S. workers for decent jobs and the need of seafood companies for low-paid, willing workers.

The Department of Labor recently issued a new rule for the H-2B guest worker visa program, which would have tested whether U.S. workers could be attracted to crab-picking work with higher wages. The rule would have required employers to offer the full prevailing wage to U.S. workers, which would have meant about a $2 per hour increase for workers on Maryland's Eastern Shore. Because Congress and a federal court both blocked the rule, we don't know the extent to which it would have worked to attract a domestic workforce.

On the other side of the balance, we can predict what it would have meant in terms of increased costs for the employers, who defeated the rule with arguments that they would go out of business if they had to pay a higher wage. According to Justin M. Donnelly's report, "Blue Crab Farming on Maryland's Eastern Shore," the wholesale price of blue crab averaged about $13.57 a pound in 2008, and crab pickers are reportedly paid a piece rate between $2 and $2.50 for each pound of picked crabmeat. Their wages must average at least the federal minimum wage of $7.25, though the cost of housing and fees for tools and protective clothing are usually deducted from the workers' pay. To increase the workers' pay by $2 an hour, to $9.25, would mean a 28 percent increase and would require the processing companies to increase the per-pound piece rate by 28 percent. Thus, a $2.50 per pound rate would become $3.20 per pound, adding 70 cents to the wholesale price of the crab meat, assuming the new cost was entirely passed on to the customer.

There's no evidence that a 5 percent increase in the wholesale price of a luxury product like Maryland blue crab meat would dampen sales significantly. As Lipton acknowledges, "Also lacking are the retail market studies to know what the elasticity of demand would be at that level. That is a key question as to how much of the cost can be passed on to the consumer, and why the availability of imports as substitutes is so important." And, of course, all of the labor cost increase would not have to be passed on to the customer. Some could be absorbed by lowering executive salaries or profits.

It is time for Congress to permit a true test of the labor market, a real opportunity for more U.S. workers to hear about and consider taking seafood-processing jobs like crab picking. If they aren't attracted by better wages, the companies can make that case and, perhaps, seek an exemption from the wage requirements. But in no case should businesses whose work can readily be done by able-bodied teenagers be exempted from these rules. Allowing them to offer jobs at substandard wages cheats U.S. workers, depresses wages, and closes off opportunities for young people here to enter the world of work.

Unemployment among young people between the ages of 16 and 24 is around 16 percent and the labor force participation rate is heading toward all-time lows. A policy that denies these workers jobs that they can easily do is not just wrong-headed, it's economically disastrous.