Will $15 Per Hour Hurt Valley Employment?

News Item: The State of California passed a $15 per hour minimum wage bill.

In the San Joaquin Valley, many see $15 per hour as high income. The Valley has double the state’s average in unemployment and many minimum wage jobs. Farm laborers and restaurant workers often receive sub-minimum wages.

Local competition for jobs has been fierce for years. Any advertised well-paying job will easily attract hundreds of applicants. Some say raising the minimum wage could increase the unemployment rate. However, lack of decent paying job opportunities caused many working age adults to drop out of the work force; if higher paying jobs are offered, many may resume looking for work.

Labor Laws Ignored

Here in the Valley, many desperate people struggle to earn a living. With the number of jobless people exceeding the number of jobs, employers dominate pay decisions and working conditions.

If an employee complains about mistreatment, he is easily replaced by someone who will accept poor conditions. Most employees fear being fired for lack of another opportunity.

Employment conditions similar to those described in The Grapes of Wrath still exist in some places, though maybe not as extreme as portrayed in John Steinbeck’s novel. Many workers toil for cash as day laborers at whatever wage is offered. Undocumented aliens accept the lowest paying jobs.

Some employers ignore over-time pay requirements or under pay for hours worked. Some ignore the minimum wage law. Some avoid providing health insurance, sick leave and family leave. Vacation time exists only in good jobs.

The San Joaquin Valley is a bastion of anti-unionism. Employers don’t like unions and won’t hire employees who favor unions. Many employees are afraid of joining a union for fear of being fired. Employees rarely bring up the subject of workers’ rights lest they be seen as troublemakers. In the Valley, attempts by unions to organize for worker representation are usually unsuccessful.

Reducing Staff Size

After the minimum wage is raised, businesses will continue to obey the law. They will either raise prices to cover increased labor costs or cut employee hours.

A new trend in retail is to replace clerks with self-service kiosks. Target, Home Depot and some grocery stores are installing kiosks; the public accepts new technology. Gas stations have had self-service pumps for years; banks have ATM’s that require no human contact.

As the minimum wage increases, kiosks and other self-service options become more cost effective in cutting labor costs by reducing the number of employees needed. Fast food companies, like McDonalds, are looking for options that will enable them to employ fewer people; self-service kiosks for placing orders are being studied.

Kula, a restaurant in Cupertino, is experimenting with an order kiosk; if successful, the chain may expand use of the device to all its Japanese restaurants.

In many Valley retail outlets, especially large department stores, finding a clerk for assistance can be problematic. Clerks have been laid off as in-store traffic drops due to increased Internet shopping. Where clerks are present, the lines for service grow longer. Self-service kiosks proliferate regardless of the minimum wage.

Rising Prices?

In the San Joaquin Valley economy, demand for products or services is very price sensitive. An increase in price can cause a sharp drop in demand—a great concern of Valley business owners. A higher minimum wage will increase operating costs and may force prices up.

As an example, gas stations with the lowest prices are much busier than higher priced stations. Walmart is successful because its prices are lower than most competitors.

A restaurant that raises menu prices will immediately notice a drop off in customers; raise prices too much and it will go out of business.

Since every business will be forced to raise the minimum wage, the pressure to raise prices will affect all employers. In theory, no business will gain an advantage from a higher minimum wage.

Fast food providers are the most popular valley restaurant. Forced to raise prices due to increasing labor costs, the higher minimum wage may cause an increase in business failures. However, there’s another possible scenario: higher wages may enable more working people to eat out. Thus, the increase in minimum wage could improve business.

 Views of an Optimistic Laborer

John works in the San Francisco Bay Area, commuting from his home in Modesto. He said that he previously worked ten years for a local business at $10 per hour. His employer told John that he would never receive a raise because a replacement could always be found at the same wage.

After John quit, he found a higher paying job in the Bay Area. He welcomes the increase in the minimum wage; many local jobs go unfilled because skilled laborers work where the pay is higher. With a $15 per hour minimum wage, many commuters will take local jobs to work closer to home.

The high unemployment rate in the San Joaquin Valley is difficult to reconcile with John’s prediction. When wages rise without a corresponding increase in the number of job openings, greater unemployment is the expected outcome; the law of supply and demand applies.

Raising the minimum wage may enable more local jobs to be filled by skilled workers. However, a large number of valley residents will remain unemployed or underemployed: the minimum wage will not fix the problem of inadequate job skills. Local employers will continue to avoid providing benefits beyond wages, keeping Bay Area companies as the preferred employers for valley residents.