Solving labor challenges within the industry

Matt Dusi, Wells Fargo Sector Manager, Fresh and Frozen Fruits and Vegetables

As I visit agribusinesses throughout the country, the topic of labor comes up in each and every conversation. Whether I’m talking with a diversified vegetable operation in California or a fruit juice processor in Michigan, the labor issue is affecting big and small agriculture operations alike. In years past, the standard conversation involved healthcare costs, and how agribusinesses could absorb the increasing costs. About two years ago, as front line labor became increasingly difficult to obtain, the conversation evolved to how agribusinesses would be able to pass along the added costs of minimum wage hikes. And now, the conversation has evolved beyond finding labor, and is about retaining semi-skilled labor, and the critical nature of this for consistent operations.

Despite the fact that the industry focus has shifted to more skilled labor positions, front-line labor continues to be expensive as healthcare costs, overtime costs, sick pay, and minimum wage hikes work their way into the system. Finding enough able bodies to fully staff harvest and processing operations has become a continual struggle. Throughout the U.S., the domestic farm labor force is declining. The previous generation of immigrant labor is aging, and the political environment is making it difficult to replace those workers. Further, children of farm workers are often obtaining higher paying jobs outside of agriculture, or finding completely different opportunities within their native countries.

What’s the answer?

Time and time again, when asking, “What is the solution to the labor issue?” I hear reference to technology. Mechanization, automation, and robotics are all terms that immediately come up. Yet, while automation, mechanization, and robotics are happening across the country, they are not the “end all, be all” answer. There are certain farm jobs that cannot be automated, and automation in and of itself also creates new and different jobs that require employees.

As indicated by the below chart, the U.S. has been experiencing a very tight labor market for the last 14 months, with unemployment rates at 4.1% or lower. And, many employers challenge the accuracy of the model. With the rise of the new “Gig” economy, where workers use their own cars to provide rides (i.e. Uber, Lyft), find contract work online, or get paid for “influence”, it could be argued that many people working in this part of the economy are not being accurately counted in the wage and employment reports. So, this could mean that the unemployment rate is actually below the current level of 3.6%. There are thousands of men and women across the country working a regular day job, then supplementing their income by taking on additional work at night or on weekends by driving for Uber, renting their home on Airbnb, or procuring contract software or design work.

Source: Bureau of Labor Statistics

Plenty of jobs, not enough skilled labor

The economy is strong as we head into 2019, and those that want a job, can find one. The question is whether the applicant has the skills needed to be a value to farming and agribusiness companies. As operations become more automated, a different type of worker is needed. Rather than an unskilled laborer needed for box packing, operations now need greater numbers of mechanics, welders, and electricians to keep very expensive packing lines and robotics running at top speed. These skilled positions demand a higher salary, and also demand a certain level of education and experience.

Operations have implemented several different options to solve the problem:

• Identifying promising internal employees with mechanical inclination and training them
• Coordinating with local high schools or junior colleges to identify programs that build the strengths needed
• Hiring individuals out of industries other than Food and Agribusiness that require technical and mechanical aptitude such as manufacturing or auto repair
• Working with equipment suppliers to identify potential candidates

No matter the method to find the right talent, the demand for individuals with this set of skills is on the rise, and hourly wages for this profile of employee are increasing dramatically.

How does the Agribusiness industry move forward?

Other than a comprehensive immigration bill that would be enacted immediately, or a slow-down in the commercial economy, the labor issues look to be with us for the foreseeable future. With a growing economy, limited growth in the domestic labor pool (U.S. population aged 16-65 is projected to grow only 0.3% for the next 5 years1), and without significant growth in the immigrant labor force, farming operations are spending greater time and resources evaluating their Human Resources programs.

Operations that can successfully implement strategies to recruit, train, and retain an efficient labor force will have a significant competitive advantage over those that cannot. Achieving this may mean looking beyond the traditional metrics of wage rates to examine what truly motivates employees, and then transforming into a company that employees are excited to work for. I have seen this surface in several fashions across the country when companies:

• Live their values of environmental stewardship
• Provide meals and healthcare for their labor force on a daily basis
• Work with local high schools and junior colleges to design and promote trade classes
• Invest in their existing employee’s education and support their advancement

Some large technology and urban companies have employed these “above and beyond” strategies for years. Smaller farm operations that lack the funds to compete on salary alone will need to capitalize on why it is a benefit to work at a smaller employer ─ more autonomy, being part of a small family, wider range of job duties ─ and promote those attributes. Adoption of new strategies to attract and retain talent in the farming industry is becoming more commonplace, and will certainly need to accelerate as the labor pool continues to shrink.

1. U.S. Department of Labor

Matt DusiMatt Dusi, is a Sector Manager within Wells Fargo’s Food and Agribusiness Advisory group focused on fresh and frozen fruits and vegetables.

Matt joined the National Food and Agribusiness Industry Advisor team in 2016 after working as the General Manager of a mid-sized winery and vineyard operation in California where he managed all aspects of a premium wine brand. Prior, Matt worked as a Relationship Manager for 13 years serving diversified farming operations on the Central Coast of California.

Matt holds a Bachelor’s Degree in Business Administration from California Polytechnic State University, majoring in Marketing and Finance. He is also a graduate of the Pacific Coast Banking School program held at the University of Washington.

Matt lives on the Central Coast of California with his wife and two children, where he is involved in producing wine grapes for premium wine production.