The agriculture industry and specifically the farming sector has always been a tough, competitive business. The farmer’s ability to adapt to the challenges of ever-changing landscapes has been imperative to their success.
Over the course of the past 20 years there has been no shortage of shifting challenges for us to overcome. A vital and essential focal point of any farming operation is labor.
Whether it is irrigation labor, tractor labor, hoeing thinning labor or harvesting labor, the lack of availability of farm field labor and what it costs are critical concerns farmers have been coping with. Over the past 30 years, California has seen the first- and second-generation field farm labor aging out. And as the next generation is striving and achieving more prosperous futures by way of higher education and preferred career pathways, it creates a void in field labor.
In an effort to exploit opportunities to both improve efficiencies while attempting to offset the increasing farm costs, the industry has turned to 21st century technology. A new array of field farm labor machinery has begun to be deployed to aid the farmer on some labor pinch points. Autonomous thinning machines, and autonomous discing tractors are either currently, or will soon be, utilized to help offset some of the labor pinch points. However, these technological advanced don’t represent enough labor solutions to keep up with the labor demand.
As a solution to acquire the seasonal field labor required, the industry has turned to utilizing the U.S. Department of Labor Temporary foreign worker H2A program to secure their farm labor and harvesting needs. The H2A program allows for applicants to secure the foreign workers for a prescribed seasonal time frame.
Only after following and abiding by the DOL-prescribed criteria can an operator petition for their required labor needs. Now with required labor secured, attention turns to the costs of the temporary worker visa H2A workforce, (hint, more complexity). For California farmers, they have known since 2017 the California minimum wage set annual increase schedule. Labor costs in the state of California continues to be burdensome due to these increasing wages.
With the annual increase set to top out at $15 per hour in 2022. From 2018 to 2021, the California minimum wage has increased over 27% from $11 an hour to $14 an hour, with another increase set for 2022 to $15 an hour.
When compared the U.S. DOL hourly pay rate for the H2A workers’ AEWR “Adverse Effect Wage Rate (excluding costs of housing, feeding, transporting) for the same time period 2018 to 2021, the hourly pay rate increase has been over 34% increase from $13.18 an hour in 2018 to $16.05 per hour in 2022.
To add more costing texture, the difference between the 2021 California hourly minimum wage and the DOL 2021 California AEWR is a $2.05-per-hour variance. This variance just points out the hourly wage differences. The other costs associated with H2A labor include DOL-prescribed costs: Seasonal housing, all meals, and daily transportation, which increases the all-in hourly cost by another 20%.
Another labor hurdle California farmers must face is the hourly minimum wage rates of other vegetable-producing states. To provide perspective on the steep disadvantage in labor costing California farmers, the 2021 California minimum wage rate of $14 per hour is $5.35 higher than Florida’s hourly wage and $3.97 higher the Florida’s AEWR. For Georgia it’s $6.75 higher than the national minimum wage average and $4.24 for the AEWR. For Michigan, $4.35 higher minimum wage and $1.33 for AEWR rate.
The fact of the matter is that California has the highest minimum wage in the nation. While we’re at it, why not add one more squeeze of lemon juice to our cuts. Due to the well-documented supply chain woes brought about by COVID and governmental issues, nearly all growing input costs have and continue to increase.
One that is of particular concern is “transportation.” More than 60% of the nation’s vegetable-consuming population is east of the Mississippi. For a plethora of reasons (fuel cost increase, lack of drivers, diversity of deliverable goods) the industry has witnessed a cross-country hauling increase of over 40-50% from recent historical rates.
At $14,000 per truckload from Salinas to Philadelphia, a per-unit freight cost of $14 per box increases from $7 to $8 per box. Add this to the state hourly wage rates described above and it presents a scenario where the large eastern regional supermarket chains throw more support to eastern regional growers. We’ll tackle more uphill battles California growers must contend with in upcoming blogs.