Peeling away onion farmers' minimum wage claims

Chuck Sheketoff

Few industries have been as vociferous in their opposition to raising Oregon’s minimum wage as the agriculture industry, and onion farmers in particular. A large contingent of onion farmers from Malheur County testified at a hearing at the Capitol last month, asserting that increased labor costs would seriously hurt their businesses.

But when we peel away layers of rhetoric and examine the evidence, there’s good reason to doubt the onion farmers’ claims. That evidence is in the form of a study by University of Idaho’s College of Agriculture and Life Sciences (PDF) examining the typical costs of production among Southwestern Idaho and Eastern Oregon onion farmers. It shows that labor — especially those workers who would gain from a minimum wage increase — makes up a small share of the cost of onion production.

The 2013 study, which draws from surveys of growers and other agricultural companies and historical pricing data, provides cost and return estimates for a model onion farm in Eastern Oregon and Southwestern Idaho. In that model farm, labor makes up about 9 percent of the costs per acre. Seeds, pesticides, fertilizers and storage each alone exceed the costs of labor.

But that’s not all. The study reveals that about 40 percent of the modest labor cost goes toward equipment operators, listed as earning a typical hourly wage of $14.25. Another 27 percent of the labor cost goes toward truck drivers, listed as earning $12.00 per hour. Thus, two-thirds of labor costs are already significantly higher than the minimum wage.

Now consider that the minimum wage bill moving through the legislature — up for a vote on the House floor later this week — would raise the minimum wage in rural areas, including Malheur County, to $12.50 per hour by 2022. Yes, it would take six years to get to that wage.

Assuming that wages for onion farm workers keep pace with inflation, by 2022 two-thirds of the labor costs (the wages of equipment operators and truck drivers) in the model farm will already be above $12.50 per hour.

Of course, every farm is different. And lifting the wages of the lowest-paid workers will have a ripple effect for those earning just above the minimum.

That said, the University of Idaho’s study of this industry casts serious doubt on the doom-and-gloom predictions of Oregon onion farmers. In fact, when examining “crucial factors” influencing costs, the study lists “farm size, crop rotation, age and type of equipment, and the quality and intensity of management.” Notably, the study does not address the different wage floors that exists today between Idaho and Oregon, more proof that the level of the minimum wage doesn’t really matter in those farms’ success.

Onion farmers, by the way, have reason to smile right now. According to the most recent USDA estimates (PDF), the price of onions in December 2015 was up about 28 percent over the prior year, while prices for many other commodities were down.

Make no mistake, farming is hard work. Farmers today are grappling with a changing environment, often competing in a global market. But despite these challenges, there is still room for their lowest-paid employees to get a raise.

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Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

By Chuck Sheketoff Feb. 17, 2016