By Dr. Alejandro Gutierrez-Li, Assistant Professor and Extension Economist
The H-2A visa program is an option that allows American growers to hire foreign agricultural workers. In the context of persistent farm labor shortages, the number of certified H-2A positions has experienced a rapid growth in the last two decades. Three states in the Southeast (Florida, Georgia, and North Carolina) and two on the West Coast (California and Washington) received more certified H-2A positions in 2022 (Figure 1). Except for Georgia, there was an increase in the amount of H-2A certified positions in the top 10 states using this program.
The demand for H-2A workers has remained strong despite continued incremental increases in their minimum compensation levels. Employers of H-2A workers need to pay at least the highest of a minimum wage known as the Adverse Effect Wage Rate (AEWR), the prevailing wage, the prevailing piece wage, the wage agreed upon a collective bargain, or the federal or state minimum wage (Osti et al., 2019).
AEWRs vary by state but are generally set to a level above the minimum wage. The AEWRs are calculated as the average hourly earnings of non-supervisory field and livestock workers in each state in the previous year. The values are determined through surveys conducted by the U.S. Department of Agriculture (called the Farm Labor Surveys) during January and April (published in May) and July and October (published in November). The information released each November includes annual data based on quarterly estimates of employment and wages (Gutierrez-Li, 2022).
In 2023, California has the highest rate, $18.65/hour, while states in the Southeast (Louisiana, Arkansas, Mississippi, Georgia, Alabama, and South Carolina) have the lowest AEWR, $13.67/hour (Figure 2). Overall, all southern states have AEWRs below the national average AEWR of $16.14/hour. However, most of the southeastern states experienced double-digit raises in AEWRs compared to 2022. Florida had the largest wage increase, as the hourly AEWR went up 15.47% (from $12.41 to $14.33/hour) followed by Alabama, Georgia, and South Carolina where wages grew by 14%. In contrast, AEWRs increased by less than three percent in West Virginia, Tennessee, and Kentucky rising from $13.89 to $14.26 an hour. On average, AEWRs climbed 7.5% nationwide.
The inflation rate in 2022 was approximately 6.5%, slightly below the average increase in AEWRs, suggesting that real wages for H-2A workers will be higher in some states (but lower in others). For growers of labor-intensive agricultural commodities employing large numbers of H-2A workers (like sweet potatoes, Christmas trees, fruits, and vegetables where labor represents at least a third of total costs), the increases in AEWRs could translate into significantly higher wage expenses. The final effect on farmers’ profit margins will depend on whether the prices of the products they sell grow enough to compensate for the rise in labor and other input costs.
Figure 1. Change in the Number of H-2A Positions Certified in Top H-2A Demanding States
Source: American Farm Bureau Federation with data from the Bureau of Labor Statistics. Data available up to the end of September of 2022.
Figure 2. 2023 H-2A Adverse Effect Wage Rates
Source: U.S. Department of Labor.
References
Adverse effect wage rates. (2022). Employment and Training Administration. US Department of Labor. Available online at: https://www.dol.gov/agencies/eta/foreign-labor/wages/adverse-effect-wage-rates
Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North Carolina. NC State Economist. North Carolina State University.
Osti, S., Bampasidou, M., & Fannin, J. M. (2019). Labor-Intensive Multiple Cropping Systems and the H-2A Program. Choices, 34(1), 1-6.
This article originally appeared in Southern Ag Today on 1/20/2023.