Labor Issues—Costs and Farmworker Shortages—Challenge Growers

By Brian German, Associate Broadcaster

This year, farmers grappled with labor issues such as shortages and increased labor costs. Some growers had more than enough workers available, while others experienced difficulty in meeting their labor needs. Dave Phippen, co-owner of Travaille & Phippen Inc., a vertically integrated company that grows, packs and ships their own almonds, described some of their struggles with labor this year. “We employ a little more than 50 people year-round, but for harvest we ramp up an extra 15-20 people. There was a squeeze on the availability of the labor and a challenge with what we thought was an acceptable rate of pay,” said Phippen.

As minimum wage increases incrementally every year, growers will struggle to keep up with the higher wages. “There was a new reality in the typical forklift driver, people working in receiving, people sampling,” Phippen elaborated. “We’re paying a little bit more for all of those tasks this year, and because there were more employment [opportunities], it was harder to find people who were available and willing to work.” Phippen also noted that employees “were requiring a greater compensation rate than last year for the same job.”

Travaille & Phippen’s operation has had to reevaluate employee compensation. Phippen explained the principle that as minimum wage increases, compensation rates compress, such that a person who was earning $15 used to be $5 above minimum wage, but is now is only $4 above minimum wage,” Phippen said.

The current federal minimum wage, established in 2009, is $7.25 per hour, up from $5.85 just two years prior. Of the top 10 agricultural producing states in the country, only 4 have minimum wage rates higher than the federal level. California and Massachusetts have the highest minimum wage levels of any other states.

Travaille & Phippen was already compensating a great deal of their labor force above minimum wage; however, to stay competitive and retain their workers, they increased their compensation rates, which caused a ripple effect throughout the supply chain. As their labor costs increased, they had to charge growers more for processing. “It had a big impact on them,” said Phippen, “particularly because those growers are receiving less revenue for their crop this year than they did last year. It was quite a squeeze for our growers and we were caught in the middle of that squeeze,” Phippen explained.

Labor issues have also been a significant concern for Mark Van Klaveren, a diversified farmer in Madera who grows almonds, watermelons and Thompson seedless grapes. Van Klaveren noted that timing plays a big role in their labor situation. “Since we tend to pick our Thompson seedless late, when there is a lot of sugar, we were able to get plenty of labor because most of the other vineyards were finished. Their farmworkers were looking for someplace to work.”

Van Klaveren reported that labor proved more challenging for their other crops. “I have a steady crew for watermelons, although with the new laws coming into effect, we are going to have to make some changes and mechanize a lot more of that harvest,” Van Klaveren noted.

Labor costs will become further complicated in the years ahead as overtime limitations established in AB 1066 phase in, beginning in 2019, with all agricultural operations expected to be in compliance by 2025. The combination of increased wages and the limitation of hours will change the way many farms operate. Some growers will increase mechanization. Others growers of labor-intensive crops may replace their crops with commodities that require fewer hours to harvest.

Van Klavern noted, “The only options we have are to mechanize or get out—one of the two. We can’t afford to produce at the same prices we’re getting right now with much higher labor costs. Some machinery out there can do what we need to do and we will look real hard to get some of that in our operation,” said Van Klavern.

An economic analysis conducted by the Highland Economics firm, shows AB 1066 having significant consequences for California agriculture. The study found the policy would reduce farm production as well as farmworker income, and the new time constraints on farmworkers would negatively impact California’s overall economy.

Van Klaveren is skeptical the new legislation will create any positive outcomes. “Workers want to put in the hours. They want to work. If we’ve got to pay them higher wages to start with, and then overtime on top of that after eight hours? There are certain jobs that won’t sustain the higher wages,” Van Klavern said.

In addition to increased costs for employers, increased minimum wage negatively affects workers who are trying to get their foot in the door of a farming operation. When the government raises the entry-level wage so high that people really have to produce a lot per hour, Van Klavern clarified, inexperienced applicants will suffer. “If you cannot produce a volume of work that is worth $15 an hour or more, you cannot work because nobody is going to hire you to lose money,” noted Van Klaveren.

Collectively, farmers are looking at overall labor cost increases between 5 and 15% over the next few years, depending on the crop. Van Klavern expressed a widely-held view that continued government intervention, particularly in the area of wages, is making farming in California unnecessarily difficult. “The whole issue of employment is a private agreement between an employee and employer, as in, ‘I will work for you for so much an hour and try to produce to your expectations.’ In other words, if somebody is willing to work for $8 an hour, why not let them work for $8 an hour? If it is fine with them and fine with the employer, then why not?” said Van Klavern.

The costs of labor and limitations on farmworker hours, combined with the costs of water and increasing environmental regulations, may prove insurmountable for California agriculture. “The economics is all simple, but the government steps in and complicates everything. I guess that leaves it to us to have to figure out how to swerve between all the regulations and stay in business,” noted Van Klavern.