A Labor Economist’s View of the Problems with AEWR Stephen G. Bronars, Partner February 5, 2019 Washington, DC

Outline AEWR is increasing significantly faster than nonagricultural wages. Regional AEWRs fluctuate substantially from year to year. A majority of farm laborers earn less than AEWR. A mandate to raise wages to at least last year’s mean would cause a wage spiral. AEWR averages pay across different occupation titles.

Current AEWR Based on the 2018 Farm Labor Survey Region AEWR Northeast I (CT, ME, MA, NH, NY, RI, VT) $13.25 Northern Plains (KS, NE, ND, SD) $14.38 Northeast II (DE, MD, NJ, PA) $13.15 Southern Plains (OK, TX) $12.23 Appalachian I (NC, VA) $12.25 Mountain I (ID, MT, WY) $13.48 Appalachian II (KY, TN, WV) $11.63 Mountain II (CO, NV, UT) $13.13 Southeast (AL, GA, SC) $11.13 Mountain III (AZ, NM) $12.00 Florida $11.24 Pacific (OR, WA) $15.03 Lake (MI, MN, WI) $13.54 California $13.92 Cornbelt I (IL, IN, OH) $13.26 Hawaii $14.73 Cornbelt II (IA, MO) $13.34 United States (excludes Alaska) Delta (AR, LA, MS) $11.33 Every AEWR is at least $11.00

AEWR is Growing Faster than Nonagricultural Wages Annual Change in: Time Period ECI AEWR 2015-2016 2.26% 3.92% 2016-2017 2.49% 2.21% 2017-2018 2.85% 6.26% 2015-2018 2.53% 4.21%

Six Regions with the Fastest Growing AEWR Since 2015 Cumulative Change Since 2015 Pacific (OR, WA) 18.44% California 17.07% Hawaii 16.53% Mountain II (CO, NV, UT) 16.50% Mountain I (ID, MT, WY) 14.72% Appalachian I (NC, VA) 14.27% ECI 7.79% 11 regions slower than national, 1 the same, 6 faster

Fast Growing AEWR is Not New An AEWR that grows faster than nonagricultural wages is not new Since 2010 AEWR has grown at a rate of 3.30% per year Since 2010 the CPI has grown at a rate of 1.78% per year Since 2010 the ECI has grown at a rate of 2.08% per year The BLS has tracked the average wages in 688 nonagricultural occupations since 2010: Only 34 (4.9%) of occupations had annual wage growth of at least 3.30% per year. None of the occupations in the “Laborer and Helper” EEO-1 category had wage growth of at least 3.30%.

If Current Trends Continue AEWR Will Increase by More Than 50% Between 2015 and 2025

Regional AEWRs Fluctuate Substantially from Year to Year Regional AEWRs are more than twice as volatile as the National AEWR In a typical year half the regions have a change in AEWR that is either: At least 1.6% higher than the national increase in AEWR, or At least 2.1% lower than the national increase in AEWR

Farm Labor Wages are Skewed Because of Piece Rate Incentives

Farm Labor Wages are Skewed Because of Piece Rate Incentives Some farm workers receive more than the guaranteed wage rate by earning substantial piece-rate incentives. My calculations indicate that the AEWR is above the median wage by: 8.1% in California 9.1% in the Pacific Region (Oregon, Washington) 20.0% in the Appalachian I Region (North Carolina, Virginia) A majority of farm workers earn less than the mean wage: 58% earn less than the mean wage in California 58% earn less than the mean wage in the Pacific Region (Oregon, Washington) 62% earn less than the mean wage in the Appalachian I Region (North Carolina, Virginia)

AEWR and Wage Spirals If the “minimum wage” in 2019 is the mean wage (AEWR) in 2018, a wage spiral could occur. A mandate that wages below last year’s mean must be raised will cause wages to increase rapidly. If employers pay all farm workers at least the AEWR, wages will increase more rapidly from year to year than in the nonagricultural sector. The only way to avoid the wage spiral is to pay some domestic workers less than H-2A workers.

Most Workers Earn Less than the Mean Wage Wages shaded in red are below the $12 mean

Increasing All Wages to At Least Last Year’s Mean Wage Would Cause a Wage Spiral If the new prevailing wage was $12 and domestic workers were paid the same as H-2A, wages would be, on average, 23% higher.

AEWR is Calculated by Averaging Wages Across Several Occupations AEWR is the annual average of the “Field and Livestock” Wage “Field and Livestock” includes: Graders and Sorters Agricultural Equipment Operators Farmworkers and Laborers, Crop, Nursery and Greenhouse Farmworkers, Farm, Ranch and Aquacultural Animals Packers and Packagers, Hand Agricultural Workers, All Other

Occupations Included in Farm Labor Survey

Wages Differ across Crop, Livestock and Equipment Operator Occupations The USDA reports very slight pay differences, nationally, between these occupations in the Farm Labor Survey The BLS, however, finds that: Wages for workers in Farmworkers, Farm, Ranch and Aquacultural Animals jobs are higher than for workers in Farmworkers and Laborers, Crop, Nursery and Greenhouse jobs Wages for workers in Agricultural Equipment Operator jobs are higher than for workers in Farmworkers and Laborers, Crop, Nursery and Greenhouse jobs

Wages Differ Across Agricultural Occupations

What Can Be Done to Make AEWR More Accurate? Index AEWR to the ECI rather than allowing AEWR to adjust each year based on labor surveys that are affected by substantial sampling error National AEWR With regional adjustments based on a three-year average of regional differences Allow a lower AEWR for jobs that include piece-rate incentives 40th percentile is preferred as a wage floor instead of the mean AEWR should be specific to Department of Labor occupation titles but the only titles with reasonable sufficient sample size are: Agricultural Equipment Operators Farmworkers and Laborers, Crop, Nursery and Greenhouse Farmworkers, Farm, Ranch and Aquacultural Animals

Questions Thank you