May 3, 2016

Nassif’s Notes: MINIMUM WAGE…WG CEO Blogs about Impact

(Editor’s Note: Western Growers President and CEO has started a blog on the Western Growers website called Nassif’s Notes to opine on various topics and initiate discussions among policy makers, journalists and WG members.  This was his first blog entry published on April 11.  See the web address in the box below to access this and other posts.)


In a recent National Geographic article by Tracie McMillan, U.C. Davis agricultural labor economist Philip Martin asserts that raising the minimum wage to $15 per hour—as was recently signed into law in California—will have a negligible impact on the prices consumers pay in the produce aisle.

Martin rightly points out that, “Farmers don’t get much of the retail dollar.”  He claims the number is around 28 percent, of which about a third goes to labor.  Extending this calculation further, Martin states that less than 10 percent of the grocery bill makes its way back to the farmworker.

Based on these numbers, Martin argues that raising the minimum wage for farmworkers will add just over $20 per year to the average family’s grocery bill.  In other words, it won’t “cost most Americans very much money at all.”  All the more reason to support a market-distorting wage hike, right?

Not necessarily.  The fact is, raising the minimum wage for California farmworkers will have sweeping consequences that neither Martin nor McMillan fully anticipate or explore.

McMillan alludes to these consequences toward the end of her article.  She states that when wages go up, farmers will often look to mechanize to keep costs down, “or retailers may begin importing food that is cheaper than what’s domestically produced.”

McMillan fails to realize that this seemingly innocuous statement is actually the main point of the story.  Or, more accurately, our collective story as Californians and Americans.

This single sentence begs the question McMillan should have been asking all along: “What impact will raising the minimum wage have on California farmers?”

Why is this an important question? Because it will fundamentally change where our fruits, vegetables and tree nuts will be produced in the future.

The short answer is increasingly likely to be: Not in California.  At least not the 60 percent of the country’s fresh produce that is currently grown in the state.  And probably not even in the United States, as other states adopt more and more of the regulatory nonsense we experience here in California.

In spite of recent reports that California farmers are seeing record revenues, profits are lower than they’ve been at any point since 2011.  That’s because the cost of farming has risen 36 percent over the past five years; inputs like seeds, fertilizer and electricity have all become significantly more expensive.  And water!

Add a 50 percent increase in labor costs to the mix, and you will only accelerate a trend that we have been observing over the past decade—the shifting of hundreds of thousands of acres of current and future California farms to other states and countries.

Raising the minimum wage by 87 percent in just eight years will cause greater disproportionate harm to employers, and many employees who will lose jobs, in regions of California with lower costs of living than San Francisco and Santa Monica.  The larger agricultural companies may be able to survive this labor cost increase but the smaller family farms will fade into oblivion.  A Democratic-controlled state that indirectly focuses on putting the little guy out of business.  Who’d a thunk it?

Governor Brown almost seemed to grasp that fact as he signed the bill, saying: “Economically, minimum wages may not make sense.  But morally, socially, and politically they make every sense because it binds the community together to make sure parents can take care of their kids.”  I fail to see the moral or social sense this will make to the farm and food industry workers who will lose their jobs to other states and countries.

Taken together with the inexorable advancement of the labor and environmental agendas, our state’s political leaders are sending a clear message about the type of California they want to see in the decades to come.

Unfortunately—and inexplicably—they aim to create a California that no longer leads the nation or world in the production of fruits, vegetables and tree nuts, as well as a host of other agricultural products.

Politicians fail to appreciate the reality that the buyers of California fruits and vegetables aren’t “consumers” in grocery stores and restaurants.  The buyers of our products are the big box stores and restaurant chains that sell our produce to consumers.  Those big companies don’t really care whether the fresh produce they sell comes from California or somewhere else.  All they care about is the cost and quality, and here’s the thing: We can promote the quality of California produce all day long, but other states and countries are producing pretty darn good produce these days, and they’re beating us on cost.

Is that really an outcome we are trying to achieve?  Is it really in our best interest to cede control of our food supply to other countries?

For those of us old enough to remember waiting in line for gas during the 1973 Arab oil embargo, I submit that food security is as important to our national interests as energy independence.

Our state’s political leaders cannot be allowed to continue their all-out assault on California farmers, driving family farms out of business and production to other countries.  And even though McMillan doesn’t realize it, that should have been the main takeaway from her article.


About Nassif’s Notes

My intention for Nassif’s Notes is to provide a regular forum for Western Growers members, policymakers, reporters and the general public to engage in meaningful dialogue around key issues impacting fruit, vegetable and tree nut farmers in Arizona, California and Colorado. I will use this blog to provide commentary on timely topics, events and people, hopefully furthering the public discourse. From time to time, I will also ask Western Growers staff to weigh in on relevant subjects. Through it all, I invite your thoughtful and respectful participation.

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