Labor Shortages Push Wages Higher
As the U.S. economy continues to grow and unemployment dwindles, it becomes harder for dairy producers to find and keep labor. There are more opportunities for potential employees to opt for work in industries like transportation, construction, hospitality and mining that offer better pay. As manual laborers chase higher wages, producers are forced to increase wages at a faster rate to compete, according to a new study from CoBank’s Knowledge Exchange Division.
“Wages have historically been higher in these other industries compared to most farm labor,” says Ben Laine, a senior economist with CoBank. “The difference now is that these jobs are much more widely available and are more in line with the background of workers coming from Mexico.”
The scarcity of farm labor is exacerbated by tougher rules surrounding immigrant workers from Mexico. In addition to immigration controls, like tightening borders, and increased immigration enforcement, birthrates in Mexico are falling and populations are moving toward urban areas, leaving fewer people with agricultural backgrounds who would be interested in U.S. farm work.
“Labor accounts for a significant share of overall operational costs for many types of farms, particularly specialty crops and dairies,” Laine says. “In 2016, labor costs on all farms made up about 10% of gross income while in the specialty crop sector, that share was closer to 27%.”
Without a clear solution to the labor shortage in sight, these challenges are likely to persist in the years ahead.
“Ultimately, the risk to the agriculture sector or any domestic industry is that wages will increase to the point where it becomes more cost-effective for the U.S. to import commodities rather than import the labor to produce them domestically,” Laine says.
The study, “Help Wanted,” is available at CoBank.com.