The Irony of the Changes to California's Wage Law -- Disappointment for All

Recently, California adopted two significant changes to its wage and hour laws.  First, it adopted a $15 per hour minimum wage, to be phased in over several years.  This past week, Governor Brown signed a bill giving farm workers overtime compensation after 8 hours per day instead of 10 hours as is currently the law.  This law will also be phased in over several years. 

I spent the morning with a farmer who indicated how his company will react to the changes, and how his employees will be affected.  Consider this:  A farmworker earning $10 per hour, and able to work 60 hours, earns $31,200 today.  When the minimum wage reaches $15, this worker will earn $46,800 ($15 x 3,120 hours).  That's a substantial raise!  However, as the 40-hour workweek is phased in, this farmer will do two things.  First, he will mechanize more to use less labor.  Second, he will limit employees to working 8 hour days.  So the employee will earn $31,200 ($15 x 2,080 hours). 

But wait, isn't that what the employee is earning now?  The irony of it all. 

 

The Devistating Impact of California’s Minimum Wage Increase on Rural California

Much of the work that we do at FLC, and that Sierra HR Partners does, is within rural California.  These areas are far from the coast and huge metropolitan areas where large businesses support a vast economy. 

 

Governor Jerry Brown has announced that the state minimum wage will rise to $15 by 2022.  How will this impact the rural areas of California where wages are generally lower and the economies are not as robust as Silicon Valley or Los Angeles? 

 

An interesting editorial in the Washington Post makes reference to setting minimum wage at about half of the median hourly wage.  The editorial refers to a Brookings Institute paper which advocates tying minimum wages to the median wage.  Apparently, other industrialized nations have used this approach. 

 

The Post indicates that California’s current minimum wage is just about half of the state’s median wage of $19.  In other words, minimum wage is probably about where it should be.  Raising minimum wage more will probably result in inflation, encourage employers to automate, and result in slower economic growth. 

 

Consider, however, that in many rural areas in California the median wage is much less than the state’s median wage.  For example, here are the median wages for several rural counties: 

            Fresno            $15.30

            Tulare             $13.86

            Kings             $18.42

            Kern              $16.15

            Merced          $15.31

            Stanislaus       $16.28

 

In comparison, the median wage for Santa Clara County is $28.14. 

 

A $15 minimum wage will be higher than Tulare’s median wage, about equal to two other counties, and not much less than the remaining counties’ median wages.  The increase will devastate rural economies.  Perhaps if California politicians were really concerned about economic growth, and a person’s ability to move up the economic ladder, the Legislature would examine the research and set realistic minimum wages based on research and scholarship.  Perhaps they would tie the minimum wage to a percentage of the median wage in each county or allow local communities to determine their own minimum wages. 

 

This increase in minimum wage will devastate rural California communities and cause the most intense suffering on those persons the lowest skill levels. Thank you to the politicians of California! 

 

You can read the Washington Post editorial at:  https://www.washingtonpost.com/opinions/the-risks-of-californias-minimum-wage-increase/2016/03/30/6d58cc6a-f68e-11e5-a3ce-f06b5ba21f33_story.html

You can read the Brookings Institute paper here:   http://www.brookings.edu/~/media/research/files/papers/2014/06/19_hamilton_policies_addressing_poverty/state_local_minimum_wage_policy_dube.pdf

 

You can learn about other countries using the median wage as a tool to set minimum wage at the website of the Organisation for Economic Co-Operation and Development:   https://stats.oecd.org/Index.aspx?DataSetCode=MIN2AVE

 

You can check the wage information for California counties here:  http://www.labormarketinfo.edd.ca.gov/data/oes-employment-and-wages.html