December 2015: Agri-Business

How will $15 wage impact farms?

Jay Matteson

Jay Matteson

According to Dean Norton, president of New York Farm Bureau, “New York farmers are simply unable to afford a $15 minimum wage in this day of national and global competition that already leads to razor-thin margins.The governor’s proposal will increase costs on farms across New York by $500 million, when our business environment is already suffering. This is not the way to invest in the upstate and rural economy.”

Mr. Norton said this in response to efforts of New York Gov. Andrew M. Cuomo to mandate a minimum wage increase from $9 per hour, which takes effect in December, to $15 per hour. The New York Farm Bureau has provided data about the impact of a minimum wage increase to $15 per hour. I also reached out to farms and agribusinesses located in or serving Jefferson County. We’ll read what they said.

Looking at Mr. Norton’s comment about competition in the industry, it is clear that our farms are already at a disadvantage. Of the top five dairy producing states in the country, California is the only state with a higher minimum wage at $10 per hour. Wisconsin, Pennsylvania and Idaho have a minimum wage of $7.25. According to a 2014 Farm Credit East report, nationally, labor accounts for 8.5 percent of total agricultural sales. In New York, labor costs already represent 14.2 percent of agricultural sales. According to the United States Department of Agriculture Economic Research Service, it is estimated that farmers in New York spent $746 million on labor in 2014. During the same year the net cash income for our farms was $2.2 billion. If the minimum wage is increased from $9 to $15 per hour it equals a half a billion dollar increase in farm labor expense which is 25 percent of net farm income.

New York Farm Bureau also looked at economic impacts on representative farms across New York. A dairy farm in the capital region milking 375 cows contributes approximately $2.2 million annually to the local economy. With an increase in minimum wage to $15 per hour, the total wage increase would equal $150,020 for six employees and then the employer payroll tax increase would add another $170,800. They looked at a 2,500 cow dairy farm in northern New York that has a $13 million economic impact on the community. For the 46 employees of the farm the wage increase is $700,800. The employer payroll tax increase is $72,476 bringing the total impact of the minimum wage increase to $773,276. It is important to note that these two dairy farms are unable to increase the price of the milk they sell to gain back the lost revenue. Prices are set nationally. Dairy farms in surrounding states such as Pennsylvania, where minimum wage is $7.25 per hour, will gain a better competitive edge over our farms.

As mentioned earlier, I quickly surveyed several farms and agribusinesses. The first question I asked was, “Are you in favor of raising the minimum wage to $15 over a three year period?” Every respondent said no. Then I asked why? One dairy farmer responded that it is an unrealistic increase and that it will increase their cost of production for every 100 pounds of milk they ship by $1.30. Keep in mind that the cost of production for many farms in Jefferson County is estimated to be $19 per hundred pounds of milk. It is also important to note that in 2015, and expected in 2016 and 2017, the price farms are paid for 100 pounds of milk shipped will be less than what it costs them to make the milk.

Another farm business that responded to my survey, one that sells products made from the farm, when asked; “How will you generate additional revenue to cover the added salary cost?” indicated they will do nothing in New York. They will consider doing more business out of state, especially in Florida. An agribusiness that responded said this proposed increase is a job killer. The respondent said it will cause them to re-evaluate any new hires and reduce staff in case of any sales decline.

I worry about my own 14-year-old son’s ability to find work as a high school student. Last summer a local farm employed him at $10 per hour to pick vegetables and help with deliveries. My son thoroughly enjoyed the work and working with the owner. It was good physical work and I appreciated his being able to work side by side with the farmer. It was a fantastic experience for my son. I highly doubt the farmer could afford to pay him $15 per hour to do the same thing.

Jay M. Matteson is agricultural coordinator for the Jefferson County Industrial Development Agency. He is a lifelong Northern New York resident who lives in Lorraine. Contact
him at coordinator@comefarmwithus.com.
His column appears monthly.