Labor Shortage, Wage Inflation Compound Agriculture Industry Struggles
New CoBank Study Outlines Labor Issues Facing Agriculture
DENVER (August 28, 2018) — As the U.S. economy continues to grow and unemployment dwindles, labor scarcity and wage inflation threaten the rural economy and put additional stress on profitability of the agriculture industry at a time of depressed commodity prices. Manual laborers are chasing higher wages offered in industries like transportation, construction, hospitality and mining, forcing agriculture employers 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,” said 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 also exacerbated by the shrinking number of migrant 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.
The CoBank study, “Help Wanted,” is broken into two sections, “Wage Inflation and Worker Scarcity,” and “U.S. Agribusiness Experience Hiring Headaches.”
The study explains how inflated wages result from scarce labor conditions and features direct accounts from a wide cross section of agricultural operations detailing the workforce challenges they are currently experiencing. Included are accounts from a poultry processer in North Carolina, a pork producer from Minnesota, a feedyard owner in Texas, custom harvesting operations in Florida and California and dairy producers in New York and Washington.
“Labor accounts for a significant share of overall operational costs for many types of farms, particularly specialty crops and dairies,” said Laine. “In 2016, labor costs on all farms made up about 10 percent of gross income while in the specialty crop sector, that share was closer to 27 percent.”
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,” said Laine.
The study, “Help Wanted,” is available at CoBank.com.
CoBank is a $131 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
For more information about CoBank, visit the bank's website at CoBank.com.