Monday, January 5, 2009

Milk will cost a lot more without foreign workers

A dairy farm in Cincinnatus, New York.Image via Wikipedia

Ag economist: Labor issues could affect food prices
Dairy Herd news source | Monday, January 05, 2009

Migrant or foreign labor is a must for the dairy industry and other parts of agriculture, and a reduction in the workforce could cost consumers considerably, says David Anderson, AgriLife Extension economist in College Station, Texas. Labor and immigration are tied together, and it includes both legal and illegal immigration, he adds.

While immigration can be from another state or another region of the U.S., many minds turn to illegal immigration coming from other countries.

“We’ve always restricted immigration through the number of visas, which are much fewer than the demand, and so that encourages illegal immigration,” he says. “But the whole issue is a lot more complex that just illegal immigration. It is one that is important to the overall economy of the U.S. and other countries. The past pace of economic growth is not possible without immigration. We could not have had the economic growth of the past if we had not had as much immigration.”

Agriculture has much at stake in this issue, he says. It needs to get the debate away from the big issues and establish that there is a legitimate need for these workers. “We have to get away from the macro debate on open borders, security, citizenship and no immigrants,” he notes.

Foreign labor represents an estimated 43 percent of the nation’s dairy workforce, Anderson says.

The value of milk production is $28.7 billion and this part of the dairy industry alone provides 147,000 jobs nationwide, he says. If the related industries are added in, it is a $55 billion industry with 363,000 jobs.

If you had a foreign labor reduction of only 20 percent, you would lose 33,000 employees, $5.5 billion in sales and $1.5 billion in income, Anderson explains. Total elimination would be a lot higher, he adds. Illegal immigrants make up 50 percent of agriculture’s workers.

“What if we lost that production, what happens to retail prices?” Anderson asks. “We could see as much as a 30 percent increase.”

With dairies, labor is the second largest expense next to feed, he said. Large dairies pay higher wagers because they need specialized labor and can afford it because they have a lower per unit costs and are better able to bid higher for labor, on average.

Anderson says turnover averages 15 percent across all dairies. The rate of turnover can impact production per cow, death loss and feed efficiency, meaning it is costly for dairy operators. “That’s the hidden effect,” he says. “There is a cost of finding and training another person.”

About 20 percent of the dairy owners said they see labor shortages and are increasing wages to attract workers, he said. Wages are higher where competing jobs are located.
There is a vacuum of available workers, in part caused by the failure to pass immigration reform and the movement of penalties from civil to criminal, Anderson said.

The oil and gas industry in the High Plains has been very competitive for laborers, pulling them away from where they were working, he said. People move for higher paying jobs. “We also have a changing economy right now that is going to affect things,” Anderson says. “When the economy is poor, fewer come and more go back because the opportunity is not here.”

Since the economy has faltered, there is evidence of migrants leaving, he says. The amount of money being sent back to Mexico is down.

“Labor is a commodity and the market has to equilibrate,” Anderson adds. “This may mean workers moving to opportunities and higher wages. The wages must become relatively equal.”

The people will go where the jobs are and where there is economic growth, he says.
More than 7,000 people work in the livestock industry in the High Plains, Anderson said, and an estimated 3,000 more will be needed by 2027 in the Panhandle.

There are about 1.2 million people in the High Plains, including parts of Texas, New Mexico and Oklahoma. That figure remains fairly stable. The average individual wage is $25,000 annually for different types of employment, but 70 percent of that in agriculture.

“It’s going to be hard to find workers,” Anderson concludes. “They must come from one of three sources: current young residents, steal them away from another job or recruit them in.”

Source: Texas A&M University
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