Oh, the labor pains! How often we hear from farm owners that they can’t find enough people willing to work on the farm. Dairy production is labor-intensive, with cows being milked, fed, moved and managed around the clock. Compounding these challenges, the labor market is increasingly tight for a number of reasons, including a declining interest in farming among younger generations, a declining pool of workers who are willing to do farm work, and few legal channels for immigrant labor. While labor-saving technology has increased productivity, people are still an integral part of cow care. In this article we’ll provide context and highlight strategies to help address labor challenges.
Background
Most hired farm employees in the United States were born in Mexico. Mexico’s close proximity to the US, and its relatively poor economic conditions, incentivized migration to the US during the 1900s and early 2000s. Many of these migrants entered the US without legal authorization and sought work on US farms. High levels of Mexico-US migration enabled US agricultural producers to maintain access to an abundant supply of relatively inexpensive labor and expand production to satisfy increased demand.
However, in recent years, US farm labor markets have undergone substantive structural changes that have increased the prevalence of labor shortages. Labor supply pressures drive farm wages up, stunt growth opportunities for American farmers, accelerate the adoption of labor-saving technologies, and force production to other countries that have lower production costs. These trends raise concerns about the economic viability of dairy farming in Michigan and the production capacity of Michigan’s dairy industry.
Dairy labor costs are rising and employment is declining
The year 2015 marked an inflection point in Michigan’s dairy labor market, when the growth of real labor costs (i.e., adjusted for inflation into 2022 dollar values) started rising and employment growth started tapering off. Figure 1 shows that between 2000 and 2015, the real average hourly wage (in $2022) of animal-related farm employees in the Lake Region was relatively stable in the $13.00 to $14.00 range. In 2017, the average real wage (in $2022) reached an all-time high of $15.65 and has continued to rise. In 2022, the average real wage was $16.90.
Dairy employment has dropped every year since the 2017 peak, and there were 500 fewer year-round-equivalent jobs on the books of Michigan dairy farmers in 2022 relative to 2017 (Figure 2). Economic theory suggests that when a labor market is experiencing a decline in the supply of labor, wages will rise, and employment will drop. These recent trends are consistent with a declining supply of dairy farm labor in Michigan.
Since 2015, the growth in total milk production declined to an average 2 percent per year. While there are many factors that can slow milk production growth (including increased building costs and processing capacity limits), a decrease in labor availability, as indicated by the reduction in farm employees, may also be a factor limiting growth.
Source: msu.edu
Photo Credit: gettyimages-jesp62
Categories: Michigan, Livestock, Dairy Cattle