The August 2015 announcement, ‘Farmworkers See Jobs, Earnings Shrivel in California Drought’ highlights the minimum wage issue going in California as a result of the drought. From the announcement 21,000 people have no jobs and the few who have are working for less than half the money they usually do. The effects of this occurrence can be seen towards the top of the supply chain as evidenced by empty shelves in supermarket. This shows how hard the situation has hit the California economy (McClurg).
The main issue is the plea by these workers for their wages to be increased. However, increasing in their wages should be based on the performance of the economy such that the Californian government should not make an imposition on the increase of their earnings as such would result in an economic ripple effect. The effect of this is the fact this would lead to an increase in supply and demand therefore they have to find means of balancing it out. While this proposal may have all the best intentions for the people of California and the economy of the state, it will only hurt these same people less experienced, lower educated citizens who earn the lowest income like the berry pickers in Watsonville California. Besides putting more money into employees’ pockets, changes in minimum wage affect unemployment rate and the economy as well. Employers will be forced to make tough changes to adapt to the increasing in production costs, which affects employment rate negatively in a job market that is already quite tough.
The side effect of an increase the earnings for the people at Watsonville are that it will only benefit the employed at the expense of the unemployed. The workers who get an increase in their wages may not feel the full effect because businesses increase prices in an attempt to compensate the rise in labor costs. Food prices will tend to particularly rise when there is an increase in minimum wages counterpoising gains for individuals who can get employed and worsening for those who cannot. This is because employers cannot completely absorb the costs by reducing their workforce because they still need that labor for smooth and successful running of their business operations, which consequently forces them to turn to other methods. In such an industry where there is heavy employment of low wage earners like this agricultural industry in California, a rise in minimum wage would only lead to an increase in capital for individuals to venture into the grocery vending business using carts as advised by Michimi & Wimberl (2010). They would aid bring healthy food prices (Rizov and Croucher 638). The farms where these same people (low-income people) are employed are not the only ones affected by such low earnings. Instead, those businesses that are highly frequented by these low-income consumers are also affected like the supermarkets. media may be restricted from advertising some products. For example, the advertisement of large Food prices are essentially important to such people because they typically spend quite a large part of their budget on food. Thus the benefit of more earnings to these lower income people would actually offset by higher prices. Those who are not minimum wage earners face higher prices without matching wage increases and their solution will be to reduce consumption in order to compensate. Additionally, the secondary effect of these reductions is the substitution for lower goods that are cheap with lower quality (Rizov and Croucher 75).
An increase in the earnings of the Watsonville people will also have adverse effects on the budget of the state of California. This will affect the budget openly by escalating the wages paid by the government to a minor number of hourly employees and somehow increase the prices of some of the products and services obtained by the government (Addison, Blackburn and Cotti 37). A large part of these costs will have to be covered by unrestricted appropriations. There will also be an indirect effect on taxes and government spending due to the increase in real income for some individuals and a cutback for others. Those people working in the agricultural industry but receiving less will have to pay more taxes and receive less government benefits than before. On the other hand, those who become unemployed e to the drought and business owners experiencing higher prices will experience a decrease in real income and will equally pay less tax and receive additional benefits than before. In essence, the net effect of raisings the earnings for the employees in California’s agricultural industry on the state’s budget will be a minor reduction in budget arrears for few years but a minor increase from that time on (Dolton, Bondibene and Wardsworth 104).
Dolton, Peter, Chiara Rosazza Bondibene and Jonathan Wardsworth . “Employment, Inequality and the UK National Minimum Wage over the Medium‐Term.” Oxford Bulletin of Economics and Statistics 74.1 (2012): 78-106.
Addison, John T, McKinley L Blackburn and Chad D Cotti. “Minimum Wage Increases in a Recessionary Environment.” Labour Economics, vol. 23 (2013): 30–39.
McClurg, Lesley. Farmworkers See Jobs, Earnings Shrivel In California Drought. August 2015. 15 November 2015 <http://www.capradio.org/news/npr/story?storyid=434763709>.
Rizov, M and R Croucher. The impact of the UK national minimum wage on productivity by low-paying sectors and firm-size groups. London: Report for the Low Pay Commission, 2011.