California has money to burn
Some economists worry that minimum wage laws will lead to higher unemployment. But there are many other pernicious side effects when governments intervene in the labor market. Here’s one example:
Targeted grazing is part of California’s strategy to reduce wildfire risk because goats can eat a wide variety of vegetation and graze in steep, rocky terrain that’s hard to access. Backers say they’re an eco-friendly alternative to chemical herbicides or weed-whacking machines that are make noise and pollution.
So what does this have to do with minimum wage laws? Consider the following:
Companies have historically been allowed to pay goat and sheepherders a monthly minimum salary rather than an hourly minimum wage, because their jobs require them to be on-call 24 hours a day, seven days a week. But legislation signed in 2016 also entitles them to overtime pay. It effectively boosted the herders’ minimum monthly pay from $1,955 in 2019 to $3,730 this year. . . .
But in January, those labor costs are set to jump sharply again. Goatherders and sheepherders have always followed the same set of labor rules last year. But a state agency has ruled that’s no longer allowed, meaning goatherders would be subject to the same labor laws as other farmworkers.
That would mean goatherders would be entitled to ever higher pay — up to $14,000 a month. . . .
Arrowsmith employs seven goatherders from Peru under the H-2A visa program for temporary farmworkers. He said the herders are paid about $4,000 a month and don’t have to pay for food, housing or phones.
“I can’t pay $14,000 a month to an employee starting Jan. 1. . . . “What’s at stake for the public is your house could burn up because we can’t fire-mitigate.”
A wage of $3730/month probably doesn’t sound very generous to the average reader of Econlog. But it’s worth keeping in mind that many of these goatherders are from low or middle income countries. Because employers pay their living expenses, they can save a sum of money that would give them some upward mobility (perhaps opening their own business) when they return to their home country. The state labor regulators in California are working to deny them this opportunity.
This is not a zero sum game. Minimum wage laws have all sorts of negative side effects, such as worsening working conditions. Were this law to take effect, many workers would probably lose jobs. But that’s just the beginning:
1. More California homeowners would lose their homes to wildfires.
2. For the few remaining jobs, Peruvians would engage in fierce non-price competition as a way of securing a position paying $140,000. This might involve massive bribes to those who control the process, perhaps funded by loans that will be repaid out of the high salary. Or perhaps higher queuing costs. One way or another, much of the potential welfare gain to Peruvian workers will be dissipated in non-price competition for the now highly lucrative jobs.
Again, it’s not a zero sum game. Regulations that make society less efficient generally make most people worse off.
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