The Minimum Wage and Productivity: A Case Study of California Strawberry Pickers

• Agricultural Economics Workshop

Date and Location

Thursday, November 1, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

This paper investigates how minimum wages and piece rate wages interact to affect worker productivity. For piece rate workers in the U.S., the minimum wage sets a lower bound on their earnings. For U.S. agricultural workers paid by the piece, productivity and the piece rate are often low enough so that the minimum wage is a binding earnings floor. For these workers, rising minimum wages may affect productivity. This paper focuses on the productivity of strawberry harvesters who are paid per flat delivered and frequently earn below the minimum wage. A simple theoretical framework demonstrates how a minimum wage increase can cause these workers to reduce effort and thus decrease productivity. In the empirical application, I use the payroll records of these workers to test this prediction. Results from a fixed effects model support the theoretical predictions and find that a three percent increase in the minimum wage causes average workforce productivity to decrease by 7 to 9 percent.