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 Editorials | Opinions | January 2008 
Automatic Minimum-Wage Increases Put Farmers in a Squeeze
 Wallowa County Chieftain
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With the new year comes higher costs to farmers, ranchers and agribusinesses in the West.
One of those higher costs that they continue to monitor is the growing minimum wage, since higher wages in the West can leave them at a disadvantage with other states and especially other countries.
On Jan. 1, California's minimum wage increased to $8 an hour from $7.50, except in San Francisco where it rose to $9.36 from $9.14.
Washington state, with its increases tied to inflation, is rising to $8.07 from $7.93; Oregon, also tied to inflation, goes to $7.95 from $7.80.
In comparison, Idaho remains at $5.85 per hour, the same as the federal minimum wage.
Under the Fair Minimum Wage Act of 2007, the minimum wage will increase to $6.55 on July 24, 2008, and to $7.25 on the same date in 2009. Meanwhile, the federal poverty level is $17,160 per year - about $8.25 per hour.
While it's understandable that society wants to eliminate poverty, having a minimum wage increase automatically controlled by inflation is not the way to do it.
What this spells out for businesses and particularly agriculture in the West is it becomes tougher to find labor or afford employees. A lot of agriculture jobs pay more than minimum wage to entice and retain good employees, but as the minimum wage goes up, farm employers must also raise their rates.
As the U.S. struggles to bring in tighter controls on illegal immigrant labor, fewer potential employees are expected to be available - especially for agriculture.
Another thing that worries U.S. farmers is how their production costs compare with those in other countries. American farmers want a level playing field with other countries, but it's tough when labor costs keep growing here yet the market offers the same market prices internationally.
A person only needs to look over the southern border for an example of how much labor costs differ. Bloomberg News recently announced that Mexico is raising its minimum wage in 2008. In the zone nearest the U.S. border, Mexican workers will receive $52.29 pesos - $4.86 - a day.
It's tough to compare that with an employee here in agriculture that might be making twice that amount per hour.
Compare that with another competitor - China.
According to the Chinese news agency Xinhua, on Dec. 26 China's Agricultural Minister Sun Zhengcai released a report that looked at rural incomes.
"According to his report, per capita net income for the country's 900 million rural residents is expected to reach 4,000 yuan ($546) in 2007, up 7 percent year-on-year in real terms. Rural net incomes have grown more than 6 percent annually for four consecutive years," said Xinhua.
The government hopes it will rise 6 percent in 2008, but it's clear that there will never be a level playing field in what Chinese farm employees earn compared to here.
Ultimately, as the wages increase, Western farmers will feel the squeeze as their profits diminish. It's bad enough to see other input prices rise so outrageously in the last year, such as for fuel and fertilizer, but this is another blow to their bank accounts.
Unfortunately, crop and cattle prices aren't tied to inflation: Just because farmers' costs go up doesn't mean they will receive more money for the food they produce. Thanks to supply and demand, and production cycles, farmers occasionally return to prices they received decades ago for their goods. How many other businesses must accept this?
Perhaps it's time to overhaul how decisions are made about minimum wages and other input costs here in the West - or better yet, let's overhaul how the market decides what farmers should be paid. |
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