April 6, 2020
Do we have a labor "shortage" or a "tight supply?"
That's a question Lee Schulz, livestock economist at Iowa State University, says comes up often in pork production. From his perspective, he says the two terms often get misused.
"Shortage exists when workers needed exceeds workers willing and available to work at the current wage rate," Schulz says. "In the short run, no feasible wage increase will attract additional workers; they're simply not there and cannot materialize in the time needed."
This is common in seasonal employment, where an employer may raise wages to entice people to switch from a lower-paying job to take a slightly better-paying one. However, Schulz says that doesn't alleviate the overall shortage in the labor supply.
"Longer-run, the impact is, you just can't attract more workers with higher wages, and that could be because they find other employment more attractive. Maybe it's not just wages that are attracting those employees, and you can't bring additional workers across the border in the form of those higher wage rates," Schulz says.
"I think we're much more in a labor shortage situation than a tight supply. Tight supplies are usually what we talk about in agricultural markets where prices rise to equate supply and demand," he says.
To put the pork production labor shortage in context, Schulz references the USDA National Agricultural Statistics Service 2017 Census of Agriculture:
Hired labor costs. U.S. hog and pig farms as classified by the North American Industry Classification System spent $1.03 billion on hired labor, a 23% increase from 2012. It's $1.7 billion and a 46% increase, including contract and custom labor.
Labor needs. Nearly 37% reported having hired labor in 2017 (31% have contract labor and 41% have custom labor).
Labor expenses. More than 1,700 reported having a hired labor expense above $100,000 in 2017. The average per farm for hired labor expense was $122,544, an increase of 20% since 2012.
Employment growth times 3
While the pork production sector is not the only agricultural sector dealing with a labor shortage, Schulz contends what makes the pork industry different from other commodities is that it is growing significantly. Comparing 2017 data with 2012, the U.S. pork industry added almost 9,000 operations based on farms with sales; based on inventory, it's about 3,200 operations.
From 2001 to 2015, pork production employment grew 2.1% annually, three times faster than the employment growth of all other U.S. industries.
Schulz and his colleagues conducted a labor study for the National Pork Producers Council to establish a baseline on the labor issues and trends in U.S. pork production. When the study was done in 2017, the national unemployment rate was 4.1%. Today it is even lower.
While agriculture has been a sector that has helped drive that low unemployment rate, there is still a shortage in the rural labor force. Schulz says some attribute this to rural outmigration, but it could also stem from labor force participation declining.
Low wages cannot be blamed for the pork production labor shortage either, Schulz says. For six out of the eight largest hog-producing states, wage increases were greater than employment increases over the 2011-16 period. For example, in Iowa, annual wages increased 4.1% for hog production where there was only a 2.9% increase in employment.
"That's a definition of shortage. We can't equate supply and demand. The increase in wages, hasn't increased supply enough to get the number of workers that are needed," Schulz says. "Again, six out of eight of the largest hog-producing states are in this situation; and hog production, for the most part, is larger, both in employment and annual wage increases, than any other industry."
Right labor, right level
Forecasting the supply of labor, Schulz says the outlook isn't optimistic. Changes in farm-specific procedures, auditing, Pork Quality Assurance, antibiotic-use guidelines, and other regulations and protocols have created strong demand for employees with higher levels of education and training.
Finding the right workers in the local labor market for the right stage or level in a company, and hiring dependable employees who will work weekends, will continue to be an issue.
Immigrant labor is also aging, and there is a smaller pool available in the immigrant labor population. Foreign-born workers have performed well, but current guest worker programs are less than ideal and create additional management challenges.
"Foreign-born workers are a great asset to every company that we talk to, but the TN programs, H-2A's, H3, J1 programs [visa programs all used within the agricultural sector], they all have such limitations that it doesn't really match hog production as well as it could, so changes certainly need to be made," Schulz says.
Trade needs labor
Changes do need to happen, says Andrew Bailey, science and technology legal counsel for the National Pork Producers Council.
"Our big thing is trying to educate legislators as much as possible about how big the labor shortfall is in the pork industry, and livestock overall," Bailey says. "It's a serious issue and it goes hand in hand with other issues. As we open up trade, we will need even more people to actually produce the hogs."
While some producers use the TN visa program, the nonimmigrant North American Free Trade Agreement Professional program, it does have its limitations. The program allows expedited authorization for workers from Canada and Mexico; however, the visas can only be granted to labor in specialty jobs, such as breeding managers. The TN visa allows for an employee to stay in the U.S. up to three years and is renewable indefinitely.
The H-1B program also requires that foreign workers must be hired for specialty occupations, such as veterinarians or farm managers. This visa allows labor to stay in the U.S. up to six years; however, there is a limited number of H-1B visas issued each year.
One of the visa programs that Bailey says just about everyone else in agriculture, except the pork and other livestock industries, can use is the H-2A visa, which allows foreign nationals to enter the U.S. temporarily or on a seasonal basis for seasonal agricultural work.
"It's a pretty popular guest worker program, among the people that can use it," Bailey says. "The problem for us is that hog production is a year-round business, and that seasonality requirement in the H-2A program means, for the most part, hog farms just don't qualify."
In December, the House of Representatives passed the Farm Worker Modernization Act, which would modernize and reform the H-2A visa program. However, Bailey says the legislation was met with mixed reviews from NPPC.
The bill does include new temporary visa options for farmworkers to work year-round, but there is a cap of 20,000 visas, with 10,000 of those reserved for the dairy industry. Under the terms of the bill, that cap can increase, but half will still be set aside for dairy, Bailey says.
"Even at its highest, I think after 10 years, [it] would be something like 40,000 visas, half of which are reserved for dairy," Bailey says. "That just doesn't solve our problem, especially with us competing with all the other livestock groups out there for workers."
There were other aspects of the bill that NPPC favored, such as the Certified Agricultural Worker status. This status which would allow current unauthorized farmworkers to get CAW visas that would be renewable, and five-and-a-half years in length. The number of CAW visas would not be capped.
"Steps like that would give certainty to people already here, that can do the work, that farmers know are already in their communities, but that they can't hire for whatever reason. We felt that would be a big positive," Bailey says.
NPPC, Senate working on bill
Since the bill has passed, NPPC has been working with the Senate, as it works on a similar bill, to illustrate the issues that still need to be addressed. With 2020 being a presidential election year, Bailey says it may be 2021 or later before more progress is made, though.
In the meantime, he encourages pork producers to make some noise at home. "One of the most important things they can do is talk to their representatives and senators and impress upon them how important of an issue this is," Bailey says.
"Farmers need to tell their staffers in their district or the members themselves, 'Hey, this is a major issue. We need a fix.' You don't have to fix the entire giant broader labor and immigration problem all at once — but this is something that's a growing concern, and quite frankly, the success of the rural economy depends on finding a way to get labor," he says.
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