Farmers say minimum wage increase could devastate local agriculture
By Sarah Hall
Editor
Tony Emmi is looking at a rough growing season ahead.
“Eight or nine years ago, I had 140 employees,” said Emmi, who owns a 300-acre farm in Baldwinsville, as well as farm stands in Baldwinsville and Liverpool. “I’m down to 70, and it’ll probably be less this year.”
Emmi said the increase in the minimum wage mandated under the 2016-17 state budget will hurt his bottom line. By the end of the year, businesses across the state must pay their employees 70 cents more an hour as part of the phase-in that will eventually bring the state’s minimum wage to $15 an hour, a move the state’s farm lobby pushed against.
According to a report from Farm Credit East, a financial institution serving the agricultural industry, farmers in New York state face a cost of anywhere between $387 million and $622 million at the height of the wage rollout in 2021. The American Farm Bureau Federation estimates that it will ultimately amount to 25 percent of farms’ net income.
“There’s very little farmers can do,” said Steve Ammerman of the New York Farm Bureau (NYFB), the state’s largest agricultural trade organization. “It’s not like they can find easy ways to trim costs elsewhere. Our operations are pretty lean as it is. It’s going to be very difficult for farms to absorb the increase.”
The state’s law
In a statement, Gov. Andrew Cuomo said the legislation “is setting an example for the nation.”
“The current minimum wage is simply impossible to live on. It condemns people to lives of poverty,” Cuomo wrote. “I’m proud that our statewide $15 minimum wage will lift the earnings of more than 2.3 million New Yorkers… [The increased minimum wage] will not only lift up the current generation of workers and their families, but enable future generations to climb the ladder of economic opportunity.”
There’s no doubt that the minimum wage has not kept pace with inflation. In fact, economists note that, because the cost of living is always increasing, the value of a new minimum wage starts to fall from the moment it is set. That said, according to the U.S. Department of Labor, the current rate of inflation is such that, “while the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and nearly $11 more per hour to equal its buying power of the late 1960s.”
New York’s minimum wage won’t immediately rise to $15. While Downstate wages will reach $15 by 2020, the wage will increase more slowly Upstate — by $0.70 a year until it reaches $12.50 in 2020. At that point, a commission will determine how it will increase from there.
No living wage for farmers
Notably, many farmers already pay their field workers more than minimum wage — an average of $12.40 an hour, according to the NYFB.
“Organic farmers are paying $10 or $11 an hour for our workers, so going up to $12.50 is not a big deal,” said Elizabeth Henderson, board member for the Northeast Organic Farmers Association of New York (NOFA-NY). “Plus, having some time — five or six years — to get up to $15 makes it totally possible.”
Henderson said most farmers, particularly organic farmers, want their workers to be paid well. The problem, however, is that farmers themselves aren’t making a living wage.
“They don’t have a decent profit margin, neither organic farmers nor conventional farmers,” Henderson said. “Farmers get a really small percentage of what people actually pay for food. They’re not actually getting enough to cover their costs of production.”
The largest costs to farmers are their labor costs, and those costs are highest on dairy — of which New York is the third largest producer in the nation — and produce farms (New York is the second-largest apple producer and in the top five for several other crops), which are the most labor-intensive operations. With the increase in wages, however, many farmers will have to cut back on their labor force, particularly in terms of younger workers, who are most likely the only ones making minimum wage.
“I can’t hire young kids and pay them that much because they’re going to be ineffective,” said Dan Palladino, president of the Onondaga County Farm Bureau. “You always like to hire high school kids, because they’re the next generation…But for every hour they work, [for] half an hour of it, they’re ineffective. For that wage, you can’t afford to do that. So youth unemployment is going to go up.”
Meanwhile, more experienced employees are already making $12.50 to $15 an hour.
“That’s the other thing that hurts,” Emmi said. “What do you tell those people? They’ll want a raise, too, and it’s not fair to tell them they can’t have it. It’s not fair to pay them the same as people just starting.”
Cuomo acknowledged the hardship an increased minimum wage would bring to farmers and there was talk of exempting them from having to pay more as the budget deadline loomed. But when the final budget passed, no exemption was included.
According to Palladino, legislators just didn’t understand the impact the increase would have on agriculture.
“It really became a political issue. It was not because there was any sound economic footing for the bill, but because the majority of people supported the minimum wage,” Palladino said. “When we met with the legislators, a lot of people didn’t understand that we couldn’t just raise our prices to offset our costs. They don’t understand the competition aspect. That’s the fight we were up against.”
Moving towards mechanization
Palladino is concerned that, as long as bordering states like Pennsylvania and Ohio continue to have a lower minimum wage, New York will be priced out of the market.
“Even a slight difference in the cost provides them with the opportunity to undercut you and take your ability to compete away,” he said. “For Pennsylvania [farmers], all they have to do is ride up 81 and they can out-compete you.”
In order to stay competitive, New York’s farmers may be forced to switch what crops they grow.
“We’ve been hearing from some of our members, especially those that grow fruits and vegetables, things that require a lot of hard labor for harvesting — apples, cabbages, things like that — they’re thinking of transitioning to more row crops, corn and soybeans,” Ammerman said. “Those are things that they can use machines for. They don’t require as much labor.”
Dairy farms may look to mechanize, as well.
“In dairy, more farmers are going to go to robotic milkers,” Palladino said. “There have been some reductions in price and some leasing options that have become available. Most farmers, 67 percent of their costs are labor costs. This is going to change the equations.”
If that happens, the local economy could see devastating effects.
“These robotic milkers are made in Europe, in Germany. So now you’re going to replace your local employees who spend their money in the local markets with equipment made overseas,” Palladino said. “So jobs disappear. You have fewer jobs and higher unemployment. On top of that, it’s going to raise the cost of everything, because people have to pay more for daycare and all of that because those people are making more.”
And it’s not just going to affect the economy: If farmers change what they produce in order to maximize profits, “there will be a lower availability of local produce and a less varied selection of fruits and vegetables,” Ammerman said.
If farms don’t mechanize or if mechanization isn’t enough to salvage some profit, some may be forced to end their operations. According to the Farm Credit East report, of the 10,000 farms in the state with hired employees, 13 to 19 percent would fall out of profitability if there is no significant change in the state’s agricultural economy.
“If those farmers have to shut the barn doors, so to speak, they’re not going out to purchase farm supplies locally,” Ammerman said. “They’re not hiring local vendors. They’re not hiring local workers who spend their money locally. There could certainly be a ripple effect.”
Changing our food policy
The state is providing a credit to farmers to offset the costs of increasing the minimum wage; like the wage, it will increase each year. In 2016, the credit is $250 per worker; $300 in 2017; $400 in 2018; $500 in 2019; and $600 in 2020. However, the credit is just a fraction of what the wage increase will cost farmers.
“If all wages are bumped up 70 cents an hour, for a regular 40-hour work week, that costs the farmer $1,456 a year, just in wages,” Ammerman said. “Then you add in payroll costs, workers’ comp, Social Security — that $250 credit doesn’t even come close to balancing the increased cost to farmers.”
So what can farmers do?
“We’re going to continue to put pressure on lawmakers and inform them about the impacts as the rollout happens,” Ammerman said. “But in terms of what farmers can do, that’s the $64 million question. There’s not a whole lot.”
NOFA-NY’s Henderson said there’s little that can be done without major changes to food policy.
“From the point of view of people running our trade policy, we can get food cheap to procure and import it from overseas. They don’t really care,” she said. “If the people in New York state want food that is grown in New York state by their neighbors, if they want farmers — the backbone of their economy for our small towns — they have to pay attention to what’s going on.”
In order to do that, Henderson said farmers need to enlist their legislators.
The community also needs to continue supporting local farmers, according to Ammerman.
“Whether it’s yogurt or maple syrup in the store or you’re going to your local farm stand for produce, look for New York-grown products,” Ammerman said.
In the meantime, as dairy and commodity prices fall and labor costs climb, many farmers wonder if it’s worth sticking it out.
“There used to be 7 million farmers in this country. Over the course of my life, that’s gone down to just over 2 million,” Henderson said.
“We’re just trying to keep our heads above water,” said Tony Emmi.
Emmi said he certainly doesn’t begrudge anyone who wants to make a living wage.
“I know people are struggling. I know they are,” Emmi said. “I’m not against anyone making more money. If I had it to pay them more, I would. My people are my best assets. Unfortunately, New York is turning them into a liability. It’s not right.”
