Today, the Department of Labor is scheduled to update overtime qualifications for “white collar” workers mandated by the Fair Labor Standards Act (FLSA). Agricultural workers are still exempt from overtime laws mandated by the FLSA.
The Fair Labor Standards Act (FLSA) sets minimum wages, overtime pay, recordkeeping, and youth employment standards. Certain employees are exempt from minimum wages, overtime pay, or both. Agricultural workers are exempt from overtime pay only. When the FLSA was established in 1938, agricultural workers were exempt from both minimum wages and overtime pay, but that was amended in 1978 so that agricultural workers now qualify for national minimum wages.
California, Hawaii, Maryland, and Minnesota are the only states that have statewide overtime pay standards for agricultural workers. In California, agricultural workers currently receive overtime for hours worked beyond 10 hours in a day or 60 hours in a week. However, Governor Brown recently signed a bill that will require employers in California to pay agricultural workers overtime pay if they work more than 8 hours in a day by 2022. At the same time, California is also increasing its minimum wage to fifteen dollars per hour.
How will rising labor costs impact agriculture in California? A recent article by Phil Martin in the ARE Update attempts to answer that question in more detail. I highlight a few observations that might influence the relative impact of these policies. First, Mexico-U.S. migration has slowed substantially since the Great Recession of 2008. At the same time, the share of Mexicans working in agriculture is shrinking. Farmers in the United States have adjusted to tighter labor markets by employing workers for longer hours and increasing employee benefits to retain employees for multiple seasons. Rising wages and overtime pay align with the trend of increasing worker benefits in a tight labor market, but the new policies in California will likely raise wages faster than the market would. New overtime laws may cause farmers to readjust workers’ hours, but farmers will also invest in more long-term strategies to reduce labor costs.
As labor costs rise, there will be further investment in labor-aids to make workers more efficient and mechanization to replace workers. Crop mix will likely adjust to favor less labor-intensive crops as Californian producers compete with agricultural producers in other states and countries that have lower labor costs. Nevertheless, many of the crops grown in California are not grown in other parts of the country. If the demand for fresh fruits and vegetables grown in California is sufficiently inelastic, farmers can pass rising costs to consumers. However, the pass-through of labor costs to consumers for agricultural products has historically been relatively low. Consequently, rising labor costs will be a strong inventive for producers invest in more labor-saving technologies.
In Montana or the northern Great Plains agricultural workers remain exempt from overtime pay standards, but producers around the country are all facing constrictions in farm labor supply, suggesting that labor costs will rise regardless of policy.