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Wednesday, April 27, 2016

California's Minimum Wage Affect on the Wine Industry

Over the next six years California's minimum wage will gradually increase from the current $10 to $15/hour. There are a few folks in the grape-growing business who believe this will pretty much be the end of the world as we know it. Others believe a living wage is a good thing.

Politics aside, how will this affect the state's wine industry? There are two key areas where wages are often at or near minimum wage: In the vineyard and in the tasting room.

Vineyards

These are the folks that work the hardest, but it's agriculture and it's usually foreign workers who have traditionally received lower wages. The laws governing these workers has gotten more complicated with OHSA rules and laws governing piece-rate employees (much ag work is done this way), plus health care. The more responsible employers are even helping to provide adequate housing; something that has been notoriously lacking.

All this costs more money so you have to assume the costs will be passed on to the consumer. Some are predicting this will lead to more mechanization in the harvesting of grapes. This is already done in the Central Valley to a large extent and will continue anyway in the tight job market. In most of the premium grape-growing regions the vineyards weren't planted with mechanized harvesting in mind so this won't be possible.

Typically for the grape harvest, a temporary larger crew is needed and labor is brought in from all over the world. During the worldwide economic downturn it was easy finding labor. This isn't the case now, but an increase in wages will help entice foreign workers.

Hospitality

Many of the winery employees you meet when visiting are paid near minimum wage although they may also get tips and commission. It's an ugly truth that some businesses may adjust workers' commissions down to make up for the increased salary.

The Smallest Businesses

Companies of under 25 employees will have longer to implement the higher wages. Many family wineries will fall into this category. It will be interesting to see how those choosing to keep salaries lower will be able to compete for workers with larger wineries who will have to pay more.

Influence on Wine Prices

Yes, labor expenses for many businesses will go up with agriculture, hospitality and retail probably the three getting hit the hardest. The premium wine regions of California will most likely absorb the increases without much problem. The Central Valley's less expensive grape-growing areas where the cheaper wines come from and the margins are smaller may have a tougher time.

It's the price of a (semi-) living wage. Just opinion, but I don't honestly expect any consumer will see much, if any, change in wine prices just because of the minimum wage ramp-up.