Markets and unions

The Guardian:

Back to school time, so let’s start with a quick quiz. The minimum wage in Britain is £6.31 an hour, while in New York it’s $8 an hour, or £4.93. So who do you think’s better paid: a hotel cleaner in London or one in Manhattan? You at the back: stop Googling. At the heart of this question lies one of the most important issues in economics and politics today – who gets paid what, and how. And the answer: New York City wins.

A cleaner on London’s Park Lane will almost certainly be on or around the minimum wage, say £6.31 for each hour. Her counterpart (because, let’s face it, it’s almost always women doing this physically punishing work) on New York’s Park Avenue is likely to be on nearly three times as much: an agreed hourly rate of $28.50, or £17.66.

Those figures upend most of what we’re usually told about how the economy works. How many times have you heard some frontbench MP or policy wonk blithely talk about how the labour market is dividing between “lovely jobs” and “lousy jobs”? As if the choice is between being a software engineer, say, or a care assistant. The implication is that anyone in the second category has opted for poverty pay and miserable conditions. In that worldview, you don’t get much lowlier than scrubbing someone else’s toilets. But the folk who do it in Manhattan hotels can expect to earn an annual salary of £32,150 – way above the average salary for all New Yorkers, and indeed for all Britons.

How often have you heard some otherwise well-meaning progressive sigh that it’s impossible to get multinationals to play nicely? To pay their staff well, or chip in their taxes. Well, here you have two people doing the same job in the same industry for the same global chains (Hilton, Holiday Inn, Hyatt) in two wealthy world cities – but one is earning nearly three times as much as the other.

So, what makes the difference between the hotel staff in London and New York? In our capital, between 2% and 4% of all hotel workers are in a trade union. Over the Atlantic, about 70% of New York hotel staff are unionised. Offer such high memberships to a public sector union official over here and they’d bite your hand off. And the hotel and motel trades council has just signed a deal taking a room cleaner’s salary up to $69,000 by 2024.