May 24, 2016

Growers brace for minimum wage hikes

Gov. Andrew Cuomo wanted New York to become the first state in the nation to increase its minimum wage to $15 an hour.

The measure eventually passed, but California beat him to the mark – and other states have passed, or are considering, minimum wage hikes this year, all of which promise to impact agricultural wages and grower bottom lines.

California lawmakers voted in early April on a deal to gradually raise California’s minimum wage from $10 to $15 an hour by 2022. Under the deal, the wage would increase to $10.50 at the beginning of 2017, and escalate steadily over the next five years.

On March 2, Oregon Gov. Kate Brown signed a minimum wage hike that, at least temporarily, made Oregon’s minimum wage the highest in the country. The bill increased the state’s minimum wage to $14.75 inside Portland’s urban growth boundary, $13.50 in midsize counties and $12.50 in rural areas by 2022.

Thirty states and Washington, D.C., have set new levels higher than the federal minimum of $7.25 an hour, in place since 2009.

The California law is the most dramatic. New York will hike the minimum wage to $15 in New York City almost immediately, while doing the same thing for prosperous suburbs by 2020. The rest of the state will go to $12.50, with the possibility that it could go to $15 if and when certain economic benchmarks are met.

Frank Gasperini, executive vice president of the National Council of Agricultural Employers, said he was surprised at the fairly tepid response from a lot of employer organizations regarding the passage of the steep minimum wage increases in California and New York, in particular.

“I was shocked that so many people did not have a written position,” Gasperini said. “There was lots of blanket opposition in places like the Chamber of Commerce and other places, but nothing on paper.

“For agriculture, one of our real differences if the country goes that way is that exemptions really don’t do us much good because we’re competing in the marketplace with jobs that will be paying $15 an hour,” Gasperini said.

He said U.S. agriculture operations compete directly with suppliers elsewhere who pay much less for workers, and “farmers can’t pass prices along when they’re competing with produce from Canada, Mexico and a lot of other countries. Mexico has a minimum of about $4.25 an hour and can produce tomatoes like ours. The major market chain participants buy and decide on the price for most produce.”

“This will put much more of our food and production offshore,” Gasperini said. “We can mechanize and keep up some. It’s already common to pay people more than they earn for you.”

He said costs for locally grown, organic and small-farm operators would go up even more than for conventional growers because of the hands-on nature of such production.

“The smaller you are, the bigger the percentage of your expenses labor tends to be,” he said.

He said the reason box stores and other business operations are not opposing the $15 levels is because “customers are saying it’s a good idea. They want more local and organic produce, but those kind of productions, facing higher minimum wages, suffer faster than somebody that’s really big.

“The big thing for us is the fact we compete in a global marketplace. (Some countries) have huge tariffs and are protectionists. We’re not a protectionist country. Producers all over the world don’t pay $9, let alone $15, an hour.”

Gasperini said the cost for participation in the H-2A program has in many cases already driven agricultural wages past the $15 mark, when adverse wage formulas are considered.

“And you have to provide free housing, too. By the time you take into consideration housing and recruitment costs, you’re over $15 an hour. H-2A employment is close to 10 percent of the workforce market and it’s continuing to grow.

“I don’t see it being sustainable for a lot of our food production,” Gasperini said. “Mechanization will cost people jobs. But our biggest concern is whether farms can survive. At $15 an hour many specialty crops just can’t adjust. They’re going to go more and more to corn and soybeans.”

California agriculture could also face significant consequences should a bill passed out of the California Assembly’s Labor and Employment Committee in early April find more traction.

According to Ian Wieland of the law firm Sagaser, Watkins & Wieland, the measure seeks to repeal the longstanding law allowing agriculture entities in the state to pay overtime after 10 hours of work in a day.

Presently, agriculture employees are exempted from labor code provisions regarding wage, hour, meal break and other working conditions. Known as the Phase-In Overtime for Agricultural Works Act of 2016, the new bill would remove this exemption and would create a schedule that would phase in overtime requirements for agricultural workers over the course of four years, beginning in 2017.

Under the proposed legislation, beginning July 1, 2017, agricultural workers would receive overtime for all work after nine and one-half hours daily.

Butch Goehring, district director for the California Association of Wine Grape Growers, said the effects of paying minimum wage workers $15 per hour “is going to really hurt the demand for our products.”

— Gary Pullano, associate editor