Farmers Face Labor Cost Surge: The Disaggregation Rule's Impact on Agriculture

LISTEN UP, FARMERS! The Department of Labor’s (DOL) 2023 reclassification of some H-2A workers’ job titles is sending wages through the roof, and another increase is on the way this year. The Bureau of Labor Statistics (BLS) 2024 Occupational Employment and Wage Statistics (OEWS), released in April, confirms it: the disaggregation rule is here to stay, and it’s going to hit your bottom line hard.

The DOL changed its longstanding Adverse Effect Wage Rate (AEWR) methodology to set distinct hourly wages for any job description with duties beyond the six farm occupations included in the USDA’s Farm Labor Survey (FLS). This means that farm positions are being reclassified to higher wage categories, and it’s going to cost you.

These new wages are a game-changer. While 96% of H-2A workers are still classified as farmworkers, graders and sorters, packers and packagers, or agricultural equipment operators, some alternative job classifications have become more prevalent. Heavy and tractor-trailer truck drivers, construction laborers, first-line supervisors of farmworkers, and shuttle drivers are now commanding much higher wages. In some states, the difference between OEWS and FLS wages is staggering: in California, construction laborers make $11.83 more per hour than farmworkers, and in Georgia, supervisors make $18.61 more per hour, more than twice the wage of farmworkers.

The disaggregation rule requires that workers be paid the highest possible wage for their job duties for the entirety of their job contract, no matter how often they perform the task. This means that even if a farmworker only performs a higher-paying task occasionally, they have to be paid the higher wage for the entire contract. This is a true minimum for H-2A wages, and it’s going to double your labor costs for the season.

These increases to hourly wages add up fast. A small farm that hires 10 H-2A workers, with one reclassified as a first-line supervisor and another as a heavy and tractor-trailer truck driver, would see their wage expenses increase around 30% a year. Large farms, with 70 employees split into disaggregated occupations, would see their wage expenses increase over 10% a year. These increases have contributed to pushing labor costs to record levels, forecast at over $53 billion across the agricultural industry in 2025.

Farmworker wages are already subject to volatile year-to-year changes, and the disaggregation rule adds a second yearly increase that farmers are unable to forecast. Nationally, heavy and tractor-trailer truck driver wages have risen 25% in five years, with yearly increases in 2025 ranging anywhere from 2% in North Carolina to 6% in Washington.

Finally, the disaggregated rule also adds administrative hurdles for H-2A users who must update their payroll systems for a second time each year when the OEWS is released, some with no grace period to implement the wages. This is a nightmare for farmers who are already struggling to keep up with the demands of the H-2A program.

So, what can you do to mitigate these increased labor costs? Here are some strategies to consider:

1. Efficiency Improvements: Invest in technology and machinery to increase efficiency and reduce the need for manual labor. Automated harvesting equipment can reduce the number of workers needed during peak harvest seasons.

2. Diversification: Diversify crop production to include higher-value crops that can offset the increased labor costs. Specialty crops that command higher prices in the market can help balance the increased labor expenses.

3. Labor Management: Implement better labor management practices, such as cross-training workers to perform multiple tasks, to maximize the use of available labor and reduce the need for additional workers.

4. Government Assistance: Seek government assistance programs that provide financial support or tax incentives for farmers facing increased labor costs. The USDA offers various programs that can help farmers manage their financial burdens.

5. Contract Negotiations: Negotiate better terms with farm labor contractors to ensure that labor costs are managed effectively. This can include negotiating lower rates or more flexible payment terms.

6. Employee Retention: Implement strategies to retain experienced workers, as training new workers can be costly. Offering competitive wages, benefits, and a positive work environment can help retain skilled labor.

By adopting these strategies, you can better manage the increased labor costs resulting from the disaggregation rule and maintain your financial stability and profitability. But remember, time is of the essence! You need to act now to stay ahead of the curve and protect your bottom line.