Business & Real Estate

California’s plan for $15 minimum wage could have huge effect

Common ground with wages and prices at Chando's

There’s a price to be paid for raising the minimum wage. At one local Mexican food chain, it’s 14 cents a taco.
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There’s a price to be paid for raising the minimum wage. At one local Mexican food chain, it’s 14 cents a taco.

A landmark plan to raise the state’s minimum wage to $15 by 2022 could create sweeping changes across the industries that rely on low-wage workers and improve the living standards for millions of Californians employed in farm fields, restaurants and retail stores.

“The expanse of the impacts is huge – a 50 percent increase in wages over five years to more than 40 percent of workers in the Sacramento region alone,” Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific in Stockton, said after Gov. Jerry Brown announced the plan Monday.

The plan, negotiated by Brown, labor leaders and legislators, could head off a similar ballot measure this November and raise the state’s minimum wage by about $1 per year, making California’s by far the highest statewide basic wage in the nation. It would increase the earnings of a full-time minimum-wage worker from $20,000 a year today to $30,000 per year in 2022.

Brown called the wage increase a matter of “economic justice” at a news conference Monday in the state Capitol.

Some cities, including San Francisco and Los Angeles, have already adopted similar proposals, and Sacramento leaders recently approved an ordinance to raise the city’s minimum wage to $12.50 an hour by 2020.

If the Legislature passes the newly announced plan, as expected, its positive effects could include boosting the living standards of the approximately 6 million Californians who earn the current minimum wage of $10 an hour and giving them more money to spend back into the economy.

The negatives could include fewer hours and fewer jobs for those workers, economists and employers said. Farmers who sell their produce out of state could be at a major disadvantage compared with farmers in states and nations with lower wages. And restaurant prices are likely to rise across the board.

 

The matter is so complicated, and fraught with unintended consequences, that it’s hard to know if the benefits or drawbacks will prevail, Michael said. Either way, he said, “The economic impacts are going to be enormous.”

Owners and employees of businesses that employ the bulk of minimum wage workers offered reactions this week ranging from outrage to joy, but some of their thoughts went beyond neat clichés.

At Monday’s news conference announcing the minimum-wage deal, longtime Burger King worker and activist Holly Dias, of Humboldt County, hugged the governor after tearfully describing how she struggled to support her infant son at the state’s lowest legal wage, which increased this year from $9 to $10 an hour.

“Today our great nation is watching us as history is made,” Dias said.

Fast food restaurant workers nationwide have participated in a campaign, led by labor unions, to establish a $15 minimum wage across the country.

But some restaurant workers interviewed Tuesday said they weren’t so sure the wage hike would be entirely good.

“They don’t think about how prices are going to go up everywhere else to cope with it,” said Gaerael Debise, 19. The cashier at the Buckhorn Grill restaurant in midtown Sacramento makes $10 an hour and helps support his mother and little sister, while attending classes at Sacramento City College.

His co-worker, Eddie Alcantara, 22, said he had worked his way up from $9 to $12 an hour and is now a supervisor at the restaurant. He said he is proud of his accomplishment and thinks others should have to do the same, and not just be paid higher wages from the start.

“The minimum wage now is OK,” he said.

Lots of business owners, and the political groups that represent them, said the wage increase was sure to lead to a decline in employment and higher consumer costs.

The owner of the medium-sized Buckhorn chain of restaurants – which employs 650 workers mainly in the Sacramento region and Bay Area – said he wasn’t happy with the plan. But he said he grudgingly accepted that it is popular with politicians and will likely pass.

John Pickerel, who co-founded the Buckhorn Steakhouse in Winters in 1980, said instead of bemoaning their fate, restaurant operators will have to adopt better business practices. They can’t just keep pushing prices higher, because customers won’t accept it, he said.

“It’s a game changer,” Pickerel said. “A lot of people would rather complain than be proactive.”

Managers will have to train and retain the most productive employees at higher wages, and mom-and-pop cafes with fewer employees could actually have a competitive edge over chains with large numbers of minimum wage workers, he said.

“It’s about being part of the solution and getting people to buy into productivity and believing people can learn things,” Pickerel said. “We can’t use a lot of warm bodies. There’s no room for error.”

One farmer said paying his workers $15 an hour would further undermine his ability to compete with growers in other states and Mexico.

“We’re already at a disadvantage with Arizona, (where farmers) pay their workers $8.05 an hour and we’re at $10. Any further increase is going to put us at a serious disadvantage,” said Joe Del Bosque, owner of Del Bosque farms in Firebaugh.

 

His workers are harvesting asparagus now at $10 an hour or more, while workers in Mexico harvest the same crop for $10 a day, he said.

“If we can’t compete with them, we can’t grow some of these crops in California anymore,” Del Bosque said.

Yolo County farmer Duane Chamberlain said his workers, who mostly make well above the minimum wage, are starting to cut alfalfa hay this time of year. He said he wouldn’t mind paying all his workers at least $15 an hour with the exception, perhaps, of those just learning.

“My workers are all worth 15 bucks an hour because they’ve been around,” said Chamberlain, who also sits on the Yolo County Board of Supervisors. “Starting people out, it would be nice to hire kids at lower wages because they’re not worth it. They don’t know what they’re doing.”

One of Chamberlain’s workers said he’s happy with the proposed pay hikes.

“To be able to help my family. For my children’s education. I’m glad my boss agrees with the wage increase,” Isaias Aguirre said as he cut hay with his brother Jose Aguirre on Tuesday. Isaias said he sends about $1,000 a month home to Mexico to help his three children.

There are additional reasons, besides experience levels, that a uniform state wage might not make sense, experts said.

Making $15 an hour in rural Yuba County, where the cost of living is relatively low for California, is much different than making $15 an hour in Santa Clara County, the expensive heart of Silicon Valley.

The Massachusetts Institute of Technology’s Living Wage Calculator estimated that for 2014, a single adult would need to make less than $10 an hour to support themselves in Yuba County, while the same adult living in Santa Clara County would need to make almost $14 an hour to pay for rent, food, transportation and other basic costs.

Oregon recently passed a new minimum wage law that took such differences into account. It will gradually increase the basic pay rate in the pricey Portland area to $14.75 an hour by 2022 while only raising the minimum wage in the most rural parts of the state to $12.50 an hour.

Michael, the UOP economist, said it’s something California lawmakers might consider.

“Connections to the cost of living and the economic structure of the community are both arguments to have regional minimum wages,” he said.

California political leaders and labor have struck a deal to raise the minimum wage to $15 per hour over the next seven years. One excited fast food worker hugged Gov. Jerry Brown at the announcement Monday, March 28, 2016.

Hudson Sangree: 916-321-1191, @hudson_sangree.

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