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October 2010, Volume 16, Number 4

California: Drought & Jobs, Housing

Drought and Jobs. California had less than normal rainfall in 2007, 2008, and 2009 ( Restrictions were imposed on pumping water via the San Joaquin-Sacramento River Delta to protect endangered fish. Farmers and their political allies complained that the government was choosing fish over food by restricting pumping, while fisherman and environmentalists asserted that pumping water for farmers was eliminating Delta smelt and other species.

Politicians and news media visited San Joaquin Valley cities such as Mendota, where the unemployment rate reached 40 percent in 2008, to support farmers who demanded more water to grow crops. Senator Dianne Feinstein (D-CA) cited high unemployment rates as evidence of the need to re-evaluate the biological opinions based on the Endangered Species Act that led to restrictions on pumping.

Predictions of how many farm jobs would be eliminated by reduced water deliveries proved to be high. University of California-Davis Economist Richard Howitt estimated that the drought and pumping restrictions would reduce farm revenue by up to $1.6 billion in 2009, eliminating up to 80,000 farm jobs on the assumption that each $1 million loss in farm sales eliminates 50 jobs, that is, each $20,000 in lost farm sales means one less farm job. Howitt later reduced his estimate of reduced revenue to $710 million and 35,000 fewer farm jobs.

University of the Pacific economist Jeffrey Michael began with employment data rather than farm revenue. Michael found that average annual San Joaquin Valley farm employment peaked at about 200,000 in 1995-96, fell to 165,000 between 2001 and 2004, and rose to 185,000 since. Meanwhile, average San Joaquin Valley construction employment rose from about 45,000 in the mid-1990s to a peak 85,000 in 2005 before falling to 65,000 in 2008. Michael concluded that the loss of construction jobs was a far more important reason for high San Joaquin Valley unemployment rates than reduced water deliveries.

A joint paper by Howitt and Michael released in September 2010 suggested 6,000 to 7,000 fewer farm jobs due to drought and reduced pumping of water in 2009 compared with 2008; the pumping restrictions alone accounted for 1,500 to 3,000 fewer farm jobs. Farmers shifted available water from low-value and mechanized field crops to higher value and more labor intensive fruit and vegetable crops, limiting job losses.

Median per capita income in the Bakersfield, Fresno and Modesto metro areas was $30,000 in 2009, about the same as the year before. There are 366 metro areas in the US, and per capita income ranged from $73,000 in Stamford, Connecticut to $20,000 in McAllen and Brownsville, Texas. Most areas with labor-intensive agriculture, such as Yakima, Washington and Valdosta, Georgia, had median per capita incomes of about $30,000.

There is more obesity in the San Joaquin Valley than in other parts of California. In most San Joaquin Valley counties, about 30 percent of adults were obese in 2007, compared to 23 percent of all California residents. Almost 10 percent of San Joaquin Valley adults had diabetes, compared to eight percent of all California residents.

Housing. Providing affordable housing for farm workers has always been difficult. Historically, farmers with low-cost land provided housing to the workers they hired as a recruitment incentive. As housing standards and enforcement were tightened and unauthorized migration increased, many farmers stopped providing housing, except to year-round workers.

Today, most hired workers commute to seasonal farm jobs from nonfarm rental housing. The NAWS found that the share of workers employed on US crop farms who lived in employer-provided housing fell from 33 percent in 1993-94 to 21 percent in 2001-02.

Year-round livestock workers such as those employed in dairies are most likely to receive employer-provided housing, followed by migrant and seasonal workers employed in "upstream" states such as New York, Michigan or Washington, where on-farm housing was traditionally provided to attract workers to areas where few lived year-round (until the 1970s, migrant families based in southern Florida, Texas, and California often migrated northward with the ripening crops). About 100,000 H-2A workers, generally in the US for at least 10 months and filling 10 percent of long-season farm jobs, must be provided with housing at no cost by their employers.

In the major farm worker states of California and Florida, fewer than five percent of workers are housed on the farm on which they work. For example, the California Department of Housing and Community Development in 2001 issued about 1,000 permits to operate farm worker housing for 23,000 workers at a time when 35,000 farm employers paid unemployment insurance taxes for a million unique social security numbers and an average 450,000 farm workers.

Farm employer plans to build on-farm housing for workers often face local resistance. Angelo Ferro's plans to house up to 140 workers near Corning, California to harvest olives drew protests from neighbors who cited safety and noise issues.

Federal, state and local governments provide assistance to farm employers, NGOs, and local government agencies to construct and operate housing for farm workers. Operating farm worker housing is complicated by the source of funds and the restrictions that accompany them. For example, many publicly funded and operated migrant housing centers are open only to legal farm workers with families, while employer-provided on-farm housing often accommodates only solo male workers (men in the US without their families). Publicly subsidized farm worker housing, as for solo males in Napa county, requires tenants to show proof that they have done farm work with wage receipts etc; some tenants earn more in nonfarm than in farm jobs.

The farm workers most in need of safe and affordable housing are recently arrived solo males and unauthorized families. Most solo males find housing in urban areas near their farm jobs, often sharing units in a manner that leads to overcrowding in conventional housing; a few workers sleep in cars and other unconventional places. Farm worker families are often larger than average and, with rental housing units smaller than average, landlords are reluctant to rent to them.

On-farm housing is a mixed blessing. For employers, workers housed on the farm are available when needed, but farm employers often complain of the cost and liability of being landlords. For workers, on-farm housing reduces housing and commuting costs, but can increase worker risk, since losing a job can mean losing housing as well.

The 2008-09 recession continues to be an echo in agricultural and nonfarm areas of California. Construction employment in California dropped by 402,000 jobs between June 2006 and June 2010, down 43 percent, helping to keep the state's unemployment rate at 12.3 percent in June 2010, compared to 9.5 percent for the US.

In June 2010, the median California home price rose for the eighth consecutive month to $270,000. However, in Stockton, the median home price was $100,500, down from almost $400,000 in 2007. Homes bought in developments near Stockton for $450,000 in 2007 were selling for $120,000 in summer 2010, and San Joaquin county's unemployment rate approached 20 percent.

Budget. California, facing a $19 billion deficit for 2010-11 ($500 for every resident), got a $125 billion state budget in October 2010, 100 days after the July 1, 2010 start of the state's fiscal year. California is one of three states that require a two-thirds vote of the Legislature to pass a budget or to raise taxes.

The total budget was $125 billion; the general fund was $88 billion.

With no budget in place by July 1, 2010, Governor Schwarzenegger tried to reduce the wages of 200,000 state workers to the federal minimum wage of $7.25 an hour until a budget was enacted. The state controller refused to reduce wages, and courts agreed that it made no sense to withhold wages that would eventually have to be paid by the state to its employees.

The share of state revenue from the sales tax, about 40 percent, has been falling as consumers shift from purchasing goods to services; the progressive income tax now accounts for 50 percent of state revenue. However, about half of the state's income tax is paid by 150,000 tax payers, meaning that the state tries to fund ongoing programs with taxes that depend largely on capital gains in the stock and real estate markets. When these markets fall, as in 2009-10, state revenues fall sharply.

Schwarzenegger threatened to end CalWorks, the state's cash assistance program for the poor. A single parent with two children generally must earn less than $14,436 a year to qualify for the cash assistance and becomes ineligible once her income exceeds about $20,000.

California has 1.2 million residents receiving Supplemental Security Income. When SSI was created in 1974, California added an extra $10 a month to the SSI payment and made SSI recipients ineligible for Food Stamps. Since 1974, Food Stamp benefits have been increased while SSI payments rose much slower.

California provides tax breaks worth up to $37,400 when employers hire workers in census tracts where half of residents live in households with incomes less than the state's median income of $47,493. The tax break is normally based on the employee's address. Many employers receiving the tax break hire employees from census tracts that have low average incomes because, for instance, a university is located there with many low-income students.

In 2008, about six percent of US-born workers in California, and a third of foreign-born workers in the state, had not completed high school. In 2007-08, about 68 percent of Californians who began ninth grade four years earlier graduated from high school, and 34 percent met admissions requirements for UC and CSU. Graduation rates varied by race and ethnicity. Over 91 percent of Asians graduated, 80 percent of whites, 65 percent of Blacks, and 61 percent of Hispanics.

Pensions. A major issue during budget negotiations was whether to reduce pension and other benefits for newly hired state employees. According to BLS, 86 percent of state and local government employees throughout the US have access to employer-sponsored medical and retirement benefits, compared with 64 percent of all US workers.

One reason that government employees get more benefits is that 55 percent are in managerial or professional occupations, compared to 25 percent of all US workers. About 90 percent of US workers covered by a collective bargaining agreement have access to both medical and retirement benefits.

The Pew Center on the States estimated that states had an unfunded pension deficit of $1 trillion to their workers after calculating pension promises for cash and health benefits and state contributions to pension funds. Colorado became the first US state to reduce pensions for retired state workers in summer 2010 below promised levels, drawing suits from retirees who questioned whether there was an "actuarial necessity" to reduce pension benefits.

Bell. Los Angeles county has almost 10 million residents, including almost four million in the city of Los Angeles. Most of the other six million residents live in the county's other 87 cities and a few live in unincorporated areas of the county. The second-largest city in Los Angeles county is Long Beach, with almost 500,000 residents.

Many Los Angeles county residents are non-US citizens who do not vote, allowing a small number of voters to control city government. Bell, a largely immigrant city of almost 37,000 residents, became a charter city in a 2006 election that drew fewer than 400 of the city's 9,000 registered voters. The change allowed members of the city council ($100,000 a year) and the city manager ($800,000) to become among the highest paid in the US.

After newspapers reported the high salaries in summer 2010, residents organized a recall campaign and forced the city manager to resign. In July 2010, the city council agreed to reduce member salaries to less than $10,000 a year, and the three highest-paid city employees, whose salaries were almost 10 percent of the city's $16 million a year general fund budget, resigned.

In September 2010, eight former and current city officials of Bell were charged with misappropriating $5.5 million in city money to enrich themselves. The Bell incident prompted residents in many of California's 480 cities to request salary information on local officials.

The Southwest Voter Registration and Education Project says Bell and eight nearby communities are over 90 percent Latino, but half of adult Latinos cannot vote because they are not US citizens. Bell was poorly managed. Its residents paid some of the highest property taxes in Los Angeles county, but the city cut police and other services to cover high salary costs.

Los Angeles police killed a Guatemala-born day laborer in Westlake near MacArthur Park in September 2010, setting off two days of riots. Many of the protestors asked why police did not wound rather than kill the knife-wielding man who lunged at them.

Day laborers have been frustrated by the LAPD's aggressive stance against the illegal street vendors. The police responded that, in some cases, street vending forced pedestrians onto the streets, endangering them. Two-thirds of Westlake's 120,000 residents are foreign-born, almost three-quarters are Hispanic, and almost half live in poverty. Many say that it is much more difficult today than in the past to earn higher wages in Los Angeles than at home, but few of those who succeeded in entering the US are going home, where they say conditions are worse.

Joel Rubin, "LAPD chief seeks answers to Westlake's rage," Los Angeles Times, September 10, 2010. Michael, Jeffrey, Richard Howitt, Josu‚ Medell¡n-Azuara, and Duncan MacEwan. 2010. A Retrospective Estimate of the Economic Impacts of Reduced Water Supplied to the San Joaquin Valley in 2009.

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