Michigan farmers who rely on migrant laborers are bracing for another difficult year ahead.
That’s because the Adverse Effect Wage Rate (AEWR) for farmers employing workers on H2-A visas climbs to $18.50 an hour in 2024, the 10th consecutive year the wage has risen.
The U.S. Department of Labor announced the new wage rate on Dec. 14 and it will be effective on Jan. 1, 2024. The new hourly wage is an increase of 6.7%, or $1.16, over last year’s rate of $17.34.
According to John Kran, national legislative counsel at the Michigan Farm Bureau, Michigan farmers are “furious” that their labor costs continue to spike and threaten their sustainability.
“They’ve been calling our elected officials in record numbers,” Kran said.
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The Michigan Farm Bureau has been urging farmers to contact officials ranging from state representatives to the U.S. Department of Labor and the White House to plead for relief.
“We need a pause in this wage rate and we need Congress and the administration to work together and come up with a better, long-term plan that keeps people in business,” he said.
In 2024, Michigan’s AEWR will be the fifth highest in the U.S., behind California ($19.75), Oregon, Washington and Hawaii. Next year, nearly half of all U.S. states will have an AEWR between $17 and $19.
“If you look at the last 10 years, it’s gone up 61%. At $18.50, that’s over $8 an hour higher than our state minimum wage,” Kran said, noting Michigan’s minimum wage that climbed from $10.10 to $10.33 per hour on Jan 1.
“There really isn’t a rhyme or reason why this rate keeps going up,” Kran said. “It’s not reflective of other minimum wages we see in the economy. We’ve got some states in the south that are $3 or $4 an hour less than our rate, and they’re likely growing the same commodities as us. How do we remain competitive within the U.S. as well as globally?”
In addition to paying for labor, farmers are paying for transportation for workers, housing and administrative costs of the program itself. Altogether, Kran estimates the hourly cost for Michigan growers to employ H2-A labor is closer to $30.
“We’re quickly pricing our farmers out of business to be able to grow fresh fruits and vegetables in our state,” he said. “Overall, it’s going to push us to rely more and more on foreign-sourced produce.”
Caleb Herrygers, a fourth-generation farmer and operations manager at Herrygers Farms in Oceana County, which has employed H2-A laborers since 2016, anticipates an extra $75,000 in labor costs in 2024. Over the past eight years, The farm is now paying $400,000 more for the same amount of hourly labor compared to eight years ago.
“Those are the numbers that are starting to add up,” he said. “You can take a little bit of a punch year to year, but you just can’t keep taking them year after year and not start to feel the effects.”
Herrygers Farms is a 1,000-acre farm producing asparagus, cherries and apples. Herrygers employs around 70 workers in the spring to pick asparagus and in fall to harvest the apple crop.
Not only are rising wage rates affecting the profitability of farms, Herrygers said it’s affecting the ability of farms to sustain operations over time, as funding needed for upkeep and maintenance of crops and infrastructure is being diverted to pay for labor instead.
“Farms keep dipping into (their) margins or slowing down capital reinvestments just so they can afford to withstand the increase in the H2- A rate,” Herrygers said. “I think we’re getting to the end of the rope there. I’m looking around (and) we’ve got a lot of equipment that should have been replaced years ago, and the funding just isn’t there to do that.”
Herrygers and other farmers lack “another option” for labor, he said. “What we’re looking at now is either staying in this program or trying to figure out automation.”
In the short term, most farmers don’t have many quick automation solutions to replace labor, Herrygers said. While he’s seen more interest in agricultural innovation as wage rates increase, many Michigan crops, like the asparagus he grows, are niche and therefore less profitable for investors to target.
Kran anticipates more farms making “tough choices” to shift to different crops or sell or rent their farms in 2024 as the cost imbalance continues to get worse.
“That trend’s just going to continue year after year,” he said. “We’re not talking about weather events making uncertainty for the farmer, we’re not talking about other input costs going up. We’re just talking about labor. One thing that is under the control of our federal legislators (is deciding) how this is calculated and give us another option to keep our folks in business.
“This is all within our means. We’re not asking to change Mother Nature here. We’re just asking for a law change.”
See more executive outlook in the 2024 Crystal Ball edition from Crain’s Grand Rapids Business.
