Report details impact of wage hikes on agriculture

Minimum wage increases and other changing labor regulations will have a dramatic impact on fruit, vegetable and other labor-intensive agricultural production in the U.S. over the next decade, according to a new Cornell University report.

The magnitude of labor costs increases will not be marginal and could alter the structure of fruit, vegetable and other specialty crop production, in addition to affecting some livestock farms, the report concludes.

As Farmdocdaily, a publication of the University of Illinois at Urbana-Champaign, reports:

“Many fruit and vegetable farmers, as well as other farms that rely on non-family labor, such as dairy farms, will need to reduce their labor use, increase productivity or take other measures, such as finding new markets, to remain viable as states mandate higher minimum wages and farmworker benefits.

“Farmers in the top 10 fruit- and vegetable-producing states in the U.S. saw the minimum wage increase from 11 percent to 45 percent between 2008 and 2017.

“California, by far the largest fruit and vegetable producer in the U.S., will raise its minimum wage to $15 by 2023 and has also mandated overtime for farm workers. Washington ($13.50 by 2021) Oregon ($13.50 by 2022), New York ($12.50 by 2021), and Arizona ($12 by 2020) also plan to raise the minimum wage. Combined, the high-wage group represents more than two-thirds of U.S. fruit and vegetable production; California alone is 55 percent of production value.

“While the average U.S. farmworker has wages well above the legal minimum, the minimum wage can influence average farmworker wages. The minimum wage will increase the government-calculated "adverse wage" for H2A guest workers and can tighten the overall U.S. agricultural labor market. Furthermore, some above minimum-wage workers may demand higher wages in response to the increase at the lowest end of the pay scale. In New York, we have heard many reports of increases in the overall pay scale for farmworkers in response to recent minimum wage increases.

“In addition to higher wages, state mandates on worker benefits and protections raise the cost of labor to farmers. Again, such changes are happening in major fruit and vegetable states. Several states have extended paid sick leave or health insurance entitlements to agricultural workers. Most significantly, in 2016, California adopted new overtime regulations allowing farmworkers to claim overtime after 10 hours of daily work or 60 hours over a week. By 2022, overtime for agricultural workers will be based on an eight-hour day. Although California is the only major producer that has adopted overtime for agriculture to date, New York and Washington have seriously considered similar proposals.

“Given the magnitude of the increases to minimum wage in these states and other changes, it is inevitable that farm businesses producing labor-intensive crops or livestock will be affected.

“Where farm-level data is available, studies suggest that farms will face higher labor expenses. Further, increasing wages may change the economics of technology adoption.

“Several outcomes are possible, including accelerated mechanization and technological innovation; increased fresh produce costs and imports; and a continued squeeze on mid-size producers. There may be regional shifts in production patterns across the U.S. and in some places different production systems such as 'local foods' may become more competitive.

“Improved human resource management and labor productivity will be imperative. From a farm management perspective, paying a competitive wage, maintaining a safe and rewarding work environment, and doing what it takes to retain the existing workforce will be imperative. Private (i.e. equipment manufacturers) and public (i.e. cooperative extension) innovations will certainly play an important role in the coming transition. Farms will need to use a variety of strategies to adapt to the new farm labor market environment.”

Researchers Jennifer Ifft and Travis Grout of the Charles H. Dyson School of Applied Economics and Management at Cornell University authored the report.