Impact of higher minimum wage debated

Many Napa County jobs pay more than planned state increases
2014-03-22T15:02:00Z 2014-03-26T13:09:22Z Impact of higher minimum wage debatedPETER JENSEN Napa Valley Register
March 22, 2014 3:02 pm  • 

With raising the minimum wage a focal point of lawmakers in Sacramento and Washington, what would the impact be in Napa County?

Progressive groups, in concert with some conservative voices, argue that an increase in wages is needed to keep pace with the high cost of living and reduce dependence on government benefits, while business interests assert it would mean higher costs and a higher unemployment rate.

A law passed by the Legislature and signed by Gov. Jerry Brown last year will raise the state’s minimum wage from $8 to $9 in July, and again to $10 in 2016.

This year, state Sen. Mark Leno, D-San Francisco, has introduced a bill that would bump it up even further. If it becomes law, Leno’s bill would raise the minimum wage to $11 an hour next year, with annual $1-per-hour increases until it hits $13 in 2017. After that, annual adjustments in the minimum wage would be tied to inflation rates.

“Low stagnant wages have forced many hard-working California families to get by with paychecks that leave them below the poverty level,” Leno said in a statement last month. “It is time to accelerate our efforts to increase the minimum wage and reduce income inequality within the state’s communities.”

According to Leno, full-time employees earning $8 per hour make about $15,000 each year, which is before-tax income. The federal poverty rate for a single adult this year is $11,670, and $23,850 for a family of four.

Oakland-based Insight Center for Community Economic Development calculates a self-sufficiency standard for counties in California, which reflects the costs of basic expenses such as transportation, food, housing, health care, child care and taxes.

In Napa County this year, that standard would require about $28,000 in annual income for a single adult, which would require a $13.18 hourly wage. For a family of two adults and two school-age children, the standard increases to $64,000 annually and an hourly wage per adult of $15.26, according to center data.

It hasn’t just been Democrats calling for higher minimum wages, either. Conservative multimillionaire Ron Unz was leading a push to get an initiative on ballots this fall that would establish a $12-per-hour minimum wage in California. He announced last week his signature-gathering campaign had failed and his initiative won’t make the November ballot.

These efforts have seen push-back from business lobbying groups, including the National Federation of Independent Business (NFIB), which represents small-business owners in California.

According to NFIB Executive Director John Kabateck, the $10-per-hour minimum wage taking effect in July will result in $4,600 in annual higher wage costs for each minimum wage employee. Small businesses employing 10 people would see $46,000 in higher labor costs each year.

Leno’s bill would increase those costs more, according to Kabateck. The increase in wage costs next year, under the bill’s provisions, would be $6,900 annually per minimum wage employee. By 2017, that cost would be $11,500 per minimum wage employee each year, or $115,000 for a staff of 10 people.

In addition, Kabateck argued that increasing the minimum wage would cause small-business owners paying employees higher wages to have to increase them more to stay competitive and retain the best employees.

“In order to get the kind of talent they need, they already pay more than minimum wage,” said Michelle Orrock, an NFIB spokeswoman in California. “You just keep adding to those costs. (Small-business owners) ask, is it really worth it to stay in business?”

In Napa Valley, the largest groups of employees with the lowest wages have traditionally been farmworkers, restaurant and hotel workers, as well as those working in winery tasting rooms.

In 2012, waiters and waitresses in Napa County earned a median hourly wage of $9.07, without counting tips, according to the federal Bureau of Labor Statistics (BLS). Maids’ and housekeepers’ median hourly wage — half earned more, half earned less — was $10.94 that year, while bag boys and hotel clerks earned $9.90 and $11.80 hourly, respectively, according to the BLS statistics. Concierges earned a higher median wage of $14.80 an hour, according to the BLS.

Recent studies and reports on farmworkers’ wages in Napa County have found they tend to earn between $11 to $12 hourly, according to a 2013 report from BAE Urban Economics.

That corresponds to a 30 percent higher hourly wage compared with the statewide average for agricultural workers, according to research from University of California, Davis management professor Robert Yetman.

But many still struggle to afford market-rate housing in Napa County, according to the BAE Urban Economics report. Citing U.S. Census Bureau data, the report states that 45 percent of farmworkers who opt to rent market rate housing in the county spend more than 30 percent of their monthly income on rent. Eighteen percent spend greater than 50 percent of income on rent, according to the report.

Should the minimum wage increase to the levels proposed by Unz and Leno’s bill, Yetman said in an interview that vineyard owners would likely try to absorb those higher costs by increasing the price of their grapes.

That would likely translate to higher costs of bottles of Napa Valley wine, but minimal to no reduction in the labor force, Yetman said. That’s because Napa Valley grapegrowers emphasize getting the highest-quality fruit, and wouldn’t sacrifice that to lower their labor costs by using more automation in their harvest and growing methods, he said.

Furthermore, Yetman said consumers have proved willing to accept higher prices for Napa Valley wine. It’s a different situation in the Central Valley, where growers use automation more to produce cheaper grapes. The price point consumers accept for those wines is lower, and increasing it could lead to fewer sales, he said.

“I think the Napa Valley consumer will accept a modest increase in price,” Yetman said.

Winery tasting rooms may not be willing to raise prices if the labor costs go up, Yetman said. He said winery owners would most likely look to cut staff if that happens.

But research he’s reviewed has shown that increases in the minimum wage haven’t translated to large cuts in the number of employees, and he expects modest job loss to result in Napa County if that happened.

“The worst-case scenarios that people give, research hasn’t shown that to occur,” Yetman said. “Let’s not fool ourselves, some people will lose their jobs.”

At Napa Valley College, where many students shoulder low-paying jobs in addition to their class schedules, some were ambivalent about the notion of raising the minimum wage.

Student Taynon Geraldizo, a 19-year-old psychology major and American Canyon resident, said he earns $8.25 an hour but expects that to bump up to $9.25 soon. He said he earns that money to pay for classes, as well as save money to pay for his apartment or room.

“Money is money,” Geraldizo said. “You have to make do.”

But he said he would need to do more research before backing a minimum wage increase in Napa County, saying it could lead to higher prices for food or services.

“The more money people have, the more money that they’re going to spend,” Geraldizo said.

Student Jack Ryann, a Napa resident majoring in international relations, said he felt any minimum wage increase should be done on a local or regional level, to a dollar amount that makes sense for that area’s cost of living. He opposed a national increase in the minimum wage.

“You really can’t expect to raise the minimum wages and expect to lift everybody up,” Ryann said. “You have people making a career in an entry-level, transitional job. You are not going to create more jobs giving people more money.”

But he said that the minimum wage, while perhaps enough to get by in states with lower costs of living, can lead to economic hardship in California. He said he earns $13 to $14 an hour at his job.

“I get by and that’s about it,” Ryann said. “Minimum wage in California is a death sentence. Here in the Bay Area and the North Bay Area, you’re getting by and that’s about it.”

Still, he said he would approach a ballot initiative or proposed legislation hiking the minimum wage with great trepidation. He said a $9- to $10-an-hour minimum wage may be acceptable in Napa County, but even then he feared it would lead to employers cutting back full-time employees to part-time hours, or even cutting staff.

“I feel it would be much better handled at a local level,” Ryann said. “You’re painting with a broad brush. As noble as somebody thinks that is, realistically you’re doing far more harm than good.”

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(6) Comments

  1. glenroy
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    glenroy - March 23, 2014 6:20 am
    That's how they stay in office...giving away others money. Over the last 20 years, our first two Blue state decades, there have been hundreds of local businesses give up the ghost county wide. Many of them tired of paying more in wages than they earned.
    The way the system works, the only way it works for everyone, is if you want to increase earnings increase skills, Napa College, Adult Ed, apprentice training etc…. or work a little harder and or a few more hours….that’s what the rest of society does from pilots, truck drivers, painters, X-ray techs.....
    Every time the minimum wage is raised you take opportunity away from those at the bottom willing to work.
    There are many to blame for this state’s pathetic economy…..and it starts with those who give away other people’s money and it will have to end with them since we’ve become a one party state.
  2. Old Time Napkin
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    Old Time Napkin - March 23, 2014 8:58 am
    Raising the minimum wage causes prices and rents to rise, so the minimum wage earner gains very little. Factor in the increased income taxes they will pay and basically they have gained nothing and maybe even lost money. The libs always look at how they can increase their voter base and totally ignore the long term consequences of their acts. "For every action there is an equal and opposite reaction".
  3. napa1957
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    napa1957 - March 23, 2014 12:35 pm
    Minimum wage jobs USED to be starting points for people in their quest for a career, or something to make enough money to pay for books and tuition while going to school. I don't believe it was ever meant to be sufficient to enable a family to raise kids. We flipped burgers, made pizzas, made beds in hotels, worked the counter at the five and dime, but no one intended to make it their lives work. I do think $8 is too low, and $12 would be great, but I don't think in the long run, it will help those who are at the bottom tier of employment to increase their employment potential.
  4. GiveTruthAChance
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    GiveTruthAChance - March 23, 2014 3:55 pm
    What does our Congressman think about this? What about our upcoming election for Congress? Who is running? Do they have opinions?
  5. Crosscountrykid
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    Crosscountrykid - March 24, 2014 5:46 am
    The libertarian in me has long thought it was not the role of government to legislate wages. The arguments against a minimum wage, however, have been pretty consistent since its inception in the 1930's. Our overall economic history clearly demonstrates their falsity. The American economy is so huge and complex, tinkering at the lowest level of the wage scale is basically irrelevant. The concentration of wealth at the top 1%-5% surpasses even the Gilded Age. In sum, legislating a minimum wage is a poor tool for social policy and programs, if that's the goal. But in the larger economic scheme of things it's not even a blip on the radar screen.
  6. StillInNapa
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    StillInNapa - March 24, 2014 8:37 am
    How is it fair that local government causes housing prices to go through the roof with the implementation of the moratorium on growth, and not regulate wage increases? The moratorium on growth has caused rent and real estate prices to sore, most of the people that gain because of that regulation also receive the advantage of paying low wages. The rich getting richer while the middle classc and poor suffer is not a sign of a healthy economy or society.
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