Farmers in Crisis: The H-2A Program and the Adverse Effect Wage Rate

FARMERS, LISTEN UP! The agricultural sector is in the midst of a labor crisis, and the H-2A program is at the center of it all. The Adverse Effect Wage Rate (AEWR) is skyrocketing, and farmers are feeling the pinch. Let's dive into the details and see how this impacts America's farmers and ranchers.

WHAT IS THE H-2A PROGRAM?

The H-2A program is a temporary and seasonal guest worker program that many farms and ranches rely on for their labor needs. It's set by the USDA’s Farm Labor Survey, which is updated annually. The Labor Department then uses this data to calculate the AEWR, or the minimum wage farmers must pay guest workers. But here's the kicker: recent increases in the AEWR have been difficult for farmers and ranchers to sustain.

THE AEWR IS OUT OF CONTROL!

John Walt Boatright, director of government affairs for the American Farm Bureau Federation, explains, "The AEWR has outpaced inflation eight of the past ten years. It's highly unpredictable from year to year. We've seen increases as high as 23 percent from one year to the next, which is just simply unsustainable given the challenges that we see and the predictability that farmers and ranchers need to be able to make ends meet."

LABOR COSTS ARE THROUGH THE ROOF!

For farms and ranches that utilize the H-2A program, labor costs account for up to 40 percent of their input costs. Boatright warns, "I think we can anticipate that a lot of these costs are going to increase as a direct result of that, and that's directly attributable to federal rulemaking that has made it more onerous for small family farms, particularly, to stay afloat."

WHAT CAN FARMERS DO?

Farmers are in a tough spot, but there are some potential solutions. Increasing the use of domestic labor could help, but the feasibility is limited due to the declining interest in agricultural work among the U.S. population. Enhancing the H-2A program could be a more feasible solution, but the program comes with extra costs on top of wages. Implementing technological advancements such as automation and mechanization could reduce the reliance on human labor and mitigate the financial burden caused by rising AEWR. However, the initial investment required for such technologies can be high, making it less feasible for smaller farms.

THE BOTTOM LINE:

The agricultural sector is facing a labor crisis, and the H-2A program is at the center of it all. The AEWR is skyrocketing, and farmers are feeling the pinch. But there are potential solutions, and farmers need to act now to stay afloat. Stay tuned to the Market Intel page at fb.org for more information.