California agriculture has always had an overtime exemption that allowed overtime to start after ten hours in a day because of the seasonality of the work. Crops don’t grow Monday through Friday from 9-5pm. Entire growing seasons can be over in a matter of weeks or months. With the new minimum wage changes came new overtime laws. Beginning January 1, 2019, the two-hour daily overtime exemption for agriculture reduces by 30 minutes per day (each year) over the next four years until it reaches overtime after eight hours. This might work great for retailers like Macy’s but like most changes in the law, the impact to agriculture was not considered.
California’s minimum wage was $9 four years ago. By 2022, it will be $15.00 per hour for an increase of 67% in eight years. According to the University of California Agriculture Extension, wages can account for almost 30% of the growing cost for an acre of conventional lettuce, and that excludes rent and harvest cost. When 30% of your growing cost goes up 67% in that short of a time, it becomes an insurmountable problem, especially when neighboring states don’t have the same rates. And none of that considers the impact of daily overtime changes.
Once again family farms are caught in the middle. The solution is not as simple as just pass it along to the consumer. There are many touch points between a farmer and a consumer and each one has a cost. Once overtime changes become effective in three months farmers can attempt to hire more workers on straight time, but that’s in a labor market that is already short of workers. Farmers can also accelerate investment in what automation exists, but that requires significant dollars which is not realistic for many small operations. A reporter once asked me why farmers don’t just switch to less labor-intensive crops. I didn’t have time to explain how consumer demand works.
Many people outside of our industry don’t understand that vegetable farmers are price takers. Price taking means farmers have no choice but to take whatever price they can get on goods or services. If PG&E decides to raise electrical rates and farmers say no, they don’t get power. They take the price. If the cost of diesel goes up $0.65 cents per gallon which it has the past year, farmers can say no, but then they don’t get diesel. They take the price.
Farmers are running out of creative ways to get the work done rather than through overtime or adding more man-hours. Just a few years ago it was not unusual for a farmer to pay an irrigator to sit in their truck for hours while water ran through the pipes just in case something leaked. Today, farmers can’t afford that oversight anymore. The farmer may have paid that same irrigator to repair sprinkler lines in the winter just so they had some income to carry them through until the following spring. Today, it’s more economical to buy single use drip tape rather than carry irrigators through the winter.
The large mechanized farms that bloggers love to bash, are becoming a necessity as a means to survive. As long as costs continue to escalate at the pace we have seen the past few years, the number of acres required to spread these costs over will become greater. As long as the daily rate in Mexico is comparable to the hourly rate in California, cheaper areas like Mexico will continue to become a larger part of the puzzle. The high paying skilled jobs and investment dollars will follow.
Our own legislators in Sacramento don’t understand this dynamic. Not because they don’t want to, but because no one is educating them. State officials experience turnover just like any other business. Someone you gave a tour to five years ago probably isn’t even there anymore. Some of the biggest threats we are facing in agriculture today have come out of Sacramento, not Washington. A lobbyist told me last week that “if you don’t have a seat at the table, you’re probably on the menu”.
We need to find a way to get our seat back.