By Keith Woodford*
America’s dairy industry, and also American fruit and vegetable production, will be seriously hit if incoming President Donald Trump aligns his actions with pre-election rhetoric. These industries rely on officially undocumented Hispanic labour, from Mexico and further south, to do much of the hard work.
Mr Trump has said he is going to send 11 million undocumented immigrants back over the border. However, cool heads from these industries will be trying in the next few weeks to get in Mr Trump’s ear to alert him to some of the economic implications. Quite simply, many of the big farms with more than 1000 cows, which now supply more than half of America’s milk, will be in turmoil without these workers.
Everybody associated with the industry knows that this is the situation. However, it has been in the interests of everyone – the workers, the farmers and the Government – to keep quiet. The workers get paid award wages, or sometimes a little more – typically $8 to $10 per hour – which does not sound much and indeed is not very much. However, these workers typically work for 60 or so hours per week and thereby make a living which is much better than they could achieve back in their home countries.
For the farmers, the system also works very well. They get reliable staff who do the job of milking cows. On these big farms, this milking typically goes on for 18 to 22 hours per day, in either two or three shifts, and with up to 5000 cows or even more going through the one milking shed, with each milked two or three times per day.
If asked, the farmers will state with a straight face, that all of their workers are documented and carry social security cards. This statement is correct, but what is not stated is that on many farms a high proportion of these cards are fake.
The Government knows that many of the cards are fake, but has an interest in maintaining the situation. This is not only because it keeps the industries viable, but because these workers with fake documentation are still paying social security taxes. It is a nice revenue source, given that the workers can never make claims for social security benefits using their fake cards.
If the Government had wanted to stop the rorting of the system, it could have done so very easily a long time ago. All it had to do was make the system electronic. However, agriculture has had an exemption from that requirement, with the recording undertaken manually.
Typically, it takes the American Government about six months to identify fake social security cards. At that point the farmer is notified. The farmer then calls in the worker and says his card is fake and that he can no longer be employed.
The worker then looks at the card, apologises profusely for accidentally using the number of his brother or nephew who has a very similar name, and promises to bring in the correct card the next day. And the next day he turns up with another fake card.
Within the fruit and vegetable industries, a somewhat different system seems to apply, where some casual workers are paid cash. That should mean the farm business cannot claim these wages as tax deductible. But even that can be managed through employment of contractors, who supply the labour, and who then simply disappear from the system, to re-appear with a new business name. Here in New Zealand, it seems amazing that such systems could survive. We have to remember that it has survived because it has been in everyone’s interest for it to survive.
During the pre-election phase, it was very much in the interests of Mr Trump to say he would send 11 million people back south over the border. My guess is that there will indeed be some token deportations, but that will be where it stops. However, only time will tell as to whether rhetoric and action do truly align.
For New Zealand dairy farmers, this simply means more uncertainty. It could mean higher global prices for dairy, but it may or may not happen.
These days nothing is certain, except for death and taxes, and even taxes would seem to be voluntary for some American groups. Whatever happens, it is surely going to be an interesting journey.
*Keith Woodford is an independent agribusiness consultant and Professor of Agri-Food Systems (Honorary) at Lincoln University. His writings are archived at http://keithwoodford.wordpress.com
29 Comments
So in a nutshell, global dairy is priced at where it is, thanks to undocumented workers in America milking cows for 60 hours a week at a wage of $8 per hour? Is that right? If so, then I'd suggest there is something very wrong with that model in terms of its sustainability. Those here in New Zealand who were outraged to learn of foreigners on work visas, or international students taken advantage and paid less than legal minimum wage (surprise surprise), should be equally outraged at this. Illegal slave labour for cheap dairy?
r-mc,
These are the going rates in the US for unskilled labour. This is the situation across many industries. Life over there is tough for anyone without a college degree, and hence the wave of anti-establishment feeling that Mr Trump has exploited.
The workers themselves do not see it as 'slave labour'; indeed it is a huge amount better than what they can earn in their own countries. But of course that does mean that it is 'right'.
Keith W
"Here in New Zealand, it seems amazing that such systems could survive." Keith - Are you really sure - seems to me we tolerate lots of rorts are here in New Zealand?
But you are right that some criminal stuff " has survived because it has been in everyone’s interest for it to survive." Right here in New Zealand we have dodgy 'training establishments' Fake businesses, and immigrants paying for jobs etc etc.
Ummm yea Kieth, obviously you haven't looked to closely at the kiwi fruit industry and presumably other fruit industries. IRD have tried with limited success.
Heard off a large central north island dairy farm sacking the workers over winter but letting them stay in the house for a few months with an appropriate letter to get the dole. No no rorts in good old NZ.
Talked to a friend and he thinks that the immigration cannot be stopped, as long as there is a demand the workers will find a way across the border. The only way it will be stopped is if they focus on the corporations that are employing them and stop it at that end.
Andrewj
The employers tend to be small to mid-sized business rather than large corporates. But it could be easily stopped by requiring employers to check the social security cards electronically. All it needs is to remove the exemption from that system which agriculture enjoys. But the social and economic disruption would be huge. The current system has become an integral part of America.
KeithW
Keith you seem to be missing the whole point. Its called democracy. American citizens have now decided that they want to vote in an administration that does enforce the law and not turn a blind eye to these rorts. A large part of last nights result is that the median wage in the US is lower now than in 1998 no doubt one of the causes of that is open border immigration forcing down the value of blue collar jobs. Ditto Brexit. The consumer will need to suck that up by paying a price for their dairy products that generally reflects the cost of production, which should include a fair wage for the workers.
The effect on the NZ dairy sector is irrelevant in this matter, its the new world order. It might actually help drive us up the value chain in order to survive.
Sheep Shagger,
You are correct that NZ is irrelevant to the decisions Mr Trump will make. But the decisions he makes are highly relevant to NZ.
Whether or not American citizens understand the role of 11 million non documented workers in their economy is questionable, but no doubt Mr trump will soon get some briefings on that role.
America's largest export destination for dairy products is in fact Mexico, and if economics were the only consideration then they could produce these products themselves. They may well do so if American prices increase.
In relation to dairy product pricing, concepts of 'fairness' have little relevance. That is not how the world works.
If the cost of farm labour rises consdierably, then the larger US dairies may well consdier robot milking. These are becoming common on smaller American farms, but on farms larger than 500 cows it has been cheaper to employ Hispanic labour. There are new robotic systems under design and testing at the moment, and the overall cost of robotic systems is likely to decrease.
'Change' is the only constant.
KeithW
Keith, I agree that robotics will ultimately take over the milking and the unavailability of cheap immigrant labour may accelerate that process. All the more reason to not allow so many illegal immigrants into the country in the first place if they are soon to be redundant.
Suggesting that " concepts of fairness have little relevance. That is not how the world works". Again I think you are missing the point, that is exactly what American voters have rebelled against. They are demanding a world where they are treated more fairly, whether they will get it is a moot point. I stand by my assertion that consumers must ultimately pay, its simple supply and demand and pricing in the long run must reflect the cost of production or there is no supply. The option of importing cheap dairy into America is likely to be off the table now.
Question Keith, obviously TPPA is dead, do you think extra tariffs will be placed on NZ dairy and beef?
Globalism gifts the power to the corporations, who then exploit the poorest countries. Leaving countries like America on a downward trajectory. Protectionism is not unusual or radical, it's just recognizing that there are borders and some industries like farming need to be protected for national security.
Keith, this may shock you
A similar concept happens here in New Zealand, quite a few dairy farm workers get put on a wage and worked to the bone 12-15 hour days, 12 days on 2 days off.....then thrown away like a cigarette when they start to complain and stand up for themselves.......probably works out at around $8 per hour. Sad that some farmers, quite a few going on statistics, reduce people and animals to units of production that are to be exploited and every last drop squeezed out.
http://i.stuff.co.nz/business/farming/dairy/76557143/Dairy-farmers-tack…
If only those people 'worked to the bone' made a complaint to the Labour Dept. That's all it would take to get these farmers sorted. That is standing up for themselves.
I spoke to a sharemilker recently whose staff work an 11.5 on 2.5off roster. Average 38hours a week. Said no one seems to want to leave as his staff have been with him for a few years now.
A lot of these are kids. They just want to please. They go onto these farms with fire in their eyes. It rapidly burns out. Lets face it cupping 1000 cows is a bit different to cupping 200 as in 20 years ago when you expected these kids to work a month then give them a weekend off. It wasnt so long ago if you were in the shed for longer than 2 hours it was considered bad. Now most of these milkings are 4 hours. Ugh. I think its unfair CO to say they arent standing up for themselves. Its hard for people to make a complaint against someone they live on the same property with and work with everyday. The jobs still need to be done. Understaffing is an industry problem. No one wants to be the whinger. So generally folk just get pissed with the job and move on. Or back to town.
Trump will be good for the US economy.
http://www.bloomberg.com/news/videos/2016-11-09/icahn-i-don-t-think-tru…
People are tired of regulations. The US just voted in a president who doesn't believe in climate change. So half of the US obviously doesn't see this as important, and yet Obama has been pushing in this direction, but he is obviously out of touch with what the average person thinks. Is this the kind of arrogance supported by media propoganda that is no longer trusted.
Trump might be good for the US economy at least in the short term although I am not holding my breath, there are too many unknowns at the moment. I do wonder though, whether being tired of regulations, or if believing Obama is out of touch with whatever the popular meme is, or thinking that the media is arrogant, will count for much when global warming really starts to wind up.
If we reversed the globalisation trend, more manufacturing would move out of China. I would rather buy something that was made in America that was built to last even if if is more expensive, surely this will be better for the environment. The globalist policies are the most destructive to the environment.
Globalist governments have implemented a reign of terror working for big business while regulating the middle classes out of existence. Trump has just called bullshit on the whole thing. Hallelujah!!
How can we trust a global warming rhetoric from leaders who have secret agendas set by big business? As Micheal Moore has said we have been living in a bubble.
I don't think Trump will change things in the US as much as they hope. The steel mills will not come back. Big car plants employing tens of thousands will not come back. Automation,robotic assembly and increasing 3D printing, means the need for unskilled and semiskilled manufacturing jobs has almost died. The growth in jobs will likely continue in high tech and the service industry as before. But if you are male and non college educated, prospects will become increasingly limited. The army vs picking strawberries in the southern states
I think Trump will go down in time as the worlds best bulls>>t artist. On one level I really hope he does "under deliver " as has endorsed the use of torture.
I would be inpressed though if he reigns in the excessive lobbyism in DC or if he takes a bipartisan approach to his political appointments.
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