16 percent H-2A wage increase impacts Idaho farmers

By Sean Ellis

Idaho Farm Bureau Federation

POCATELLO – Idaho farmers who use foreign guest workers under the federal H-2A program will have to pay those workers 16 percent more than they did last year.

For many farming operations that use the program, the increase will severely affect their bottom line, especially considering that farm commodity prices aren’t increasing and input costs aren’t decreasing.

“It will certainly have a significant impact on our operation,” said Chad Henggeler, field manager for Henggeler Packing Co., one of the state’s largest fruit orchards. “When you take a 16 percent increase in costs in one year, that’s pretty substantial.”

Henggeler said labor costs represent about 65 percent of the total costs associated with growing fruit. His company will use 52 H-2A workers this year, which will be about 95 percent of his total workforce.

Given that, “When you add a 16 percent increase in costs in one year, that’s a substantial amount of money,” he said. “It’s a huge (impact) to our bottom line.”

The federal H-2A agricultural guest worker program allows agricultural producers who can’t find enough domestic workers to bring in foreign guest workers to fill jobs on a temporary or seasonal basis.

Besides paying for their housing and transportation to and from the United States, farm operations that use H-2A workers must pay them a minimum wage mandated by the federal government.

That wage differs by state and is determined by the U.S. Department of Labor based on USDA farm labor wage surveys of non-supervisory farm and ranch workers in a particular area. That wage, known as the H-2A “adverse effect wage rate,” increased by an average of 6 percent across the nation this year.

But in Idaho, the AEWR increased 16 percent, from $11.63 in 2018 to $13.48 in 2019.

“Our costs are going up 16 percent. That’s a lot,” said Brock Obendorf, a hop farmer in southwestern Idaho.

Obendorf, who will use about 250 H-2A workers this year, estimates the increased AEWR wage will increase his costs by $500-700 per acre this year.

“It’s a big problem,” he said. 

The national AEWR average this year is $12.96, a 6 percent increase over last year’s $12.20 rate. Putting the average U.S. increase in the AEWR in perspective, the average hourly increase in earning in the nation was 2.9 percent in 2018.

According to American Farm Bureau Federation, the biggest increases in the AEWR were in the West. The AEWR increased by 23 percent in Nevada, Utah and Colorado, by 16 percent in Idaho, Wyoming and Montana and by 15 percent in New Mexico and Arizona.

It rose by 6 percent in California, Oregon and Washington.

Only three states experienced declines – Iowa (minus 0.6 percent), Florida (minus 0.4 percent) and Missouri (minus 0.6 percent) – and the rest of the states experienced increases between 2 and 9 percent.

American Farm Bureau Federation Economist Veronica Nigh points out the AEWR increases come at a time when total U.S. net farm income is down 44 percent from where it was in 2013.

Henggeler said he can’t find domestic workers and had no choice but to turn to the H-2A program four years ago.

To deal with this year’s increase, the Henggeler operation will probably end up taking out some of its orchards so the company can reduce its labor force and overall costs. But Henggeler is concerned about the possibility of future large increases in the AEWR rate in Idaho.

“I worry that if we continue to have these types of increases, we’re basically going to be priced out,” he said.

Jennifer Uranga, who owns Mountain West Ag Consulting, which specializes in H-2A issues, said her organization fielded a lot of calls about the AEWR increase when it was made official in early January.

She said the increase in Idaho is causing a lot of people who use the H-2A program to take a close look at how many workers they need and whether they can delay some work.

This year’s 16 percent increase in Idaho’s AEWR rate was the biggest increase the state has experienced since it rose 7 percent in 2014. It was flat in 2018, decreased 1 percent in 2017 and increased 5 percent in 2016 and 4 percent in 2015.

From 2014 to 2019, Idaho’s AEWR rate has increased 26 percent, from $10.69 to $13.48. The national average has increased 17 percent during that same period.