Bob's Words of Wisdom News

Is the Idaho Dairy Industry’s Reliance on Undocumented Workers a Bad Business Model?

If you have a business built on the backs of cheap labor performed by illegal immigrants, you have a bad business model which is doomed to failure and all the complaining in the world is not going to change that. When you build a business that requires cheap labor, you run the risk of not being able to find that labor when you have wage price inflation because as wages go up prices need to go up and if your product is not price elastic along with the cost of labor, you will soon be out of business.

As Idaho is primarily an agricultural state, it has a great need for H-2A guest workers: “Total applications from Idaho agricultural businesses seeking H-2A workers increased 32 percent from fiscal year 2015 to 2017,” according to the Idaho Department of Labor. With a 2.8% unemployment rate, it makes it more difficult for agricultural-based businesses to find low wage workers. The Dairy industry alone requires about 8,500 workers but there aren’t enough Americans to fill these jobs and it is estimated by some that 75% of these workers are illegal.

The difference between crop workers and dairy workers is crop farmers are able to get the necessary H-2A visas but the dairy farmers can’t because their workers are needed year round. If these farmers want to maintain their workers they should be lobbying to change the laws that will allow more H-2A visas or green cards to be issued instead of trying to bring in and keep more illegals here in Idaho.

Bringing in more illegal immigrants will not solve the Dairy farmer’s problems. Their problem is more of an economic problem because even if we get more H-2A visas issued, we are going to see rising inflation in wages paid to Idaho workers, inflation long overdue in our state. There are other problems that must be contended with. Idaho is currently in the midst of a population explosion and adequate housing has become a serious problem as prices are rising faster than incomes. Where do the dairy farmers intend to house the illegal and H-2A workers that they need for their businesses? Worse yet, even if they do find housing, who is going to be responsible for the additional cost of infrastructure such as the education of the illegal workers’ children, not to mention their medical costs? There are no easy fixes to these problems as they are multifaceted.

I will say that if we can get the trade tariff issue resolved and find more equal footing with foreign trading partners like Canada which imposes a 270% tariff on American dairy products, this would allow for better pricing and distribution. With lower tariffs, farmers could sell across the border giving them a broader market and allowing them to pay higher wages and maybe hire more Americans to fill their positions.

There is not a single answer to this problem but allowing illegals in is against the law and needs to be corrected. Idaho is the fourth highest dairy producing state. When it comes to money made on farm products like hay, wheat, milk and beef cattle, Idaho dominates in the West per-capita. That’s according to University of Idaho Agricultural Economist Ben Eborn. In 2017, Idaho had 490 dairy farms which were all family owned and operated. If we want to see this industry do well, we must solve the problem they have with labor costs. A simple solution to the labor problem would be to allow more of the dairy laborers to obtain green cards but that does not solve their housing, education, and medical needs. When the rubber meets the road, dairy farmers must be able to charge more for their products in order to increase wages and benefits to these workers and as wages increase, you will find more legal residents filling open positions on these farms.

There are no easy fixes but removing tariffs would be a good beginning. We would like to hear your comments on this subject.