The August 2015 announcement, ‘Farmworkers See Jobs, Earnings Shrivel in California Drought, ’ highlights the minimum wage issue in California due to the drought. To the announcement, 21,000 people have no jobs, and a few have been 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 supermarkets. 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 their wages should be based on the economy’s performance such that the Californian government should not impose an increase in 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 state’s economy, 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 the minimum wage affect the unemployment rate and the economy. Employers will be forced to make tough changes to adapt to the increase in production costs, which affects the employment rate negatively in a job market that is already quite tough.
The side effect of an increase in the earnings for the people at Watsonville is 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 to compensate for the rise in labor costs. Food prices will tend to rise, particularly when there is an increase in minimum wages counterpoising gains for individuals who can get employed and worsening for those who cannot. Employers cannot completely absorb the costs by reducing their workforce. After all, they still need that labor for their business operations to run smoothly and successfully, forcing them to turn to other methods. In such an industry with heavy employment of low-wage earners like this agricultural industry in California, a rise in the minimum wage would only increase capital for individuals to venture into the grocery vending business using carts, as advised by Michimi & Wimberly (2010). They would aid in bringing healthy food prices (Rizov and Croucher 638).
The farms where these people (low-income people) are employed are not the only ones affected by such low earnings. Instead, those businesses that these low-income consumers highly frequent are also affected, like the supermarkets. Media may be restricted from advertising some products. For example, the advertisement of large Food prices is 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 be 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 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 a 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 increasing 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 working in the agricultural industry but receiving less will have to pay more taxes and receive fewer government benefits. 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 a 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.” Labor 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.
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