Ontario's Minimum Wage: Can our growers survive a 75-cent hike?

Sunday, January 10, 2010

The projected March increase to $10.25 will put the province's minimum wage a hefty $2.25 above B.C.'s and $1.25 above Quebec's. Many producers of fruit and vegetables think they simply can't afford it

by SUZANNE DEUTSCH AND NICOLAS MESLY

As of March 31, Ontario's minimum wage will rise to $10.25 an hour and many growers of labour-intensive crops are starting to wonder if they will be able to survive the hike.

This latest jump of 75 cents an hour will bring the three-year increase to 28 per cent and makes Ontario the highest paying jurisdiction in Canada. It will create a $2.25 an hour gap with the lowest-paying province, British Columbia.

A Nov. 19 report by Guelph's George Morris Centre on minimum wage increases in Ontario said the added labour expense will decrease the profitability of labour-intensive crops, like peaches, by almost 50 per cent. Since there's little opportunity to pass on this labour cost, farmers will simply have to absorb the expense. The report's findings are based on a cost and return analysis that established net returns by deducting the variable and fixed costs per acre from the sales per acre. 

"We have the highest priced labour, that is not subsidized, on the planet," says Ken Forth, president of Foreign Agricultural Resource Management Service (FARMS) and chair of the Ontario Fruit and Vegetable Grower's Association (OF&VGA's) Labour Issues Co-ordinating Committee. Only Europe pays higher wages, but its agricultural sector gets massive subsidies.

Minimum wage laws were originally introduced as a way to curb poverty, and to make sure that the "working poor" earned sufficient income to meet their basic needs.

According to Keith Godin, Jason Clemens and Niels Veldhuis, authors of "Misconceptions about Minimum Wages," a report undertaken for the Fraser Institute "minimum wage laws are like the road to hell. They are paved with good intensions."

The authors point out that U.S. and Canadian research shows that minimum wage increases are accompanied by a host of negative side-effects, including job losses. Employers typically reduce the number of workers and/or the number of hours their employees work. Whichever angle you look at it, it ends up exacerbating the problem even more.

It's a nightmare, adds Forth. For many growers, there is no wiggle room left. Most are excellent managers and have increased the efficiency of their operations. "It's all been done. The guys that are left, in my mind, are pretty good businessmen to still be in business."

Forth suggests that it will take some time before anyone notices the shift that is occurring in the countryside. Farms, unlike factories, don't leave behind derelict buildings right in the middle of downtown where its an obvious eyesore to everyone when they go out of business, so the fruit and vegetable sector's plight will largely go unnoticed. The change is too subtle for the casual observer.

In all, 528,000 acres were planted to fruits and vegetables in Canada, according to Statistics Canada's June 2009 report. Of these, 84 per cent were located in Ontario and Quebec. Combined total farmgate value of fruits and vegetables in Canada was just under $2 billion in 2008.

Farms that produce high-value crops, like lettuce, cucumbers or broccoli, and employ many workers will switch to corn and soybeans rather than let the field revert to weeds. Since the general public will still see fields being farmed, they won't see a difference. Farmers will still try to get some production value out of their land, but there is little money to be made off 100 acres of high-value land by growing grains and oil seeds. According to Forth this change is happening as we speak.

There won't be long line-ups of people calling it a tragedy or the end of an era, like they did with the auto industry. No one will be picketing government and large food chains and demanding bailouts for the many businesses facing hardship.

And even if they did, he warns, with farmers representing only two per cent of the population of the province, their voice likely wouldn't make it to the Premier's office. But the problem, as Forth puts it, is that people can't eat cornflakes for the rest of their lives.

Perhaps they believe the Americans will feed us, Forth adds. Many people think most of the food comes from there anyway and don't think it's a big deal, until something goes wrong in California, that is. "We are not a price-setting commodity," says Kevin Schooley, executive director of the North American Strawberry Growers Association, who is calling on the Ontario government to support fruit and vegetable growers and all those who depend on farm labour. "We are price takers, not price setters and that's a big challenge." Besides labour, the other costs of doing business have increased as well.

"It's a very serious issue," says Paul Watson who farms 350 acres near Bowmanville.

"Depending on the crop, payroll can be 40 to 50 per cent of our gross expenditures. As for the income, we hope to net between 10 and 20 per cent of our gross but that is getting almost unheard of." "The problem is the money's got to come from somewhere. Tim Hortons, McDonald's, Loblaws, hell, even Sears, all of their competition is facing the same issue. It doesn't matter which coffee shop you go to, they're putting the prices up. They're able to do that, we're not. Our competition in eastern Ontario is California and Quebec.

Both are paying lower wage rates."

Local food trend
Farmers who are selling direct to the public through U-Picks, farm stores or at local farmers' markets will be able to adjust their pricing and weather the increase a bit easier, Schooley says. Moreover, demand for Ontario strawberries has been strong this past summer. This allowed prices to remain slightly higher than normal and allowed producers to absorb at least some of last year's minimum wage increase.

But, as Schooley points out, who's to say if that trend will continue and what the choke point will be for consumers. Will they still want to buy local if it means paying four to five times what they would pay for produce at a chain?

Paul Ralph has a different perspective. He's the owner of Cedar Hills Berry Farm in Pakenham, near Ottawa, and farms about 200 acres in strawberries, raspberries, sweet corn and Christmas trees. None of his 25 workers earn minimum wage.

In fact, he makes a point of giving them a raise when they come back year after year and most earn between $10 and $15 an hour.

Cedar Hill products are well-regarded by customers, thanks to the local food movement, and Ralph obtains what he feels is a fair price for his products, not only at his four farm stand locations, but also for those sold to food stores. Throughout the season, a four-litre box of strawberries with the name of his farm on it will disappear much faster than cheaper ones from California.

Ralph says his family doesn't drive Cadillacs, but they aren't poor either. The farm supports him, his wife and his son's family. "From a personal standpoint and from that of running my business, I would prefer to see wages as low as possible, but from an ethical standpoint I can't say that $10.25 is too much for somebody, if that person is going to work as hard as I work," adds Ralph.

Don't get him wrong, Paul Ralph isn't in favour of an imposed hike either. Anytime the minimum wage goes up, it puts pressure upwards on his wages, too.

"We're competing here with places where these kids get minimum wage, end of the story, period, that's it, there's no discussion," he explains. Paying more than minimum wage has proven to be a good way to attract and retain employees. Some of their harvesters started as young as 14 and became cashiers and supervisors, through high school and university.

Ralph says he feels fortunate that he doesn't need to rely on foreign workers to staff his operation. Hiring local labour is a way to give back to the community which, in return, supports his farm. He started the farm in 1978 and it has become well known in the area that, if you want a summer job, you can usually get one at Cedar Hill because they hire a lot of young people.

Foreign worker program
Cedar Hill Berry Farm is perhaps one of the few operations in Ontario that hasn't experienced a labour shortage. Most operations rely heavily on foreign workers to man their farms.

But resorting to foreign workers is neither a cheap nor an easy way to solve a labour shortage. Non-profit organizations in Ontario, such as FARMS, employed 15,722 foreign workers in 2008. Its Quebec counterpart, la Fondation des Entreprises en Recrutement de Main-d'oeuvre agricole (FERME), brought in close to 7,000 workers this year to work in Quebec, in spite of the economic crisis, for more than 500 agriculture-related businesses, according to René Mantha FERME's general manager.

On average, the added cost of housing and utilities to employ foreign workers tacks on an additional $2.50 an hour to the minimum wages workers receive. This amount varies depending on the duration of employment.

The picking season ended around Oct. 9 in Ste-Anne-des-Plaines, Que., a good three weeks ahead of last year and Fraisebec's 152 foreign workers have headed home to Mexico and Guatemala. Owners Isabelle and Simon Charbonneau wonder how many more seasons they will be able to afford having them return.

With 160 acres in production, Fraisebec is Quebec's largest berry grower and distributor and the Charbonneaus are concerned that the Quebec government will follow in Ontario's footsteps. Last May's minimum wage increase of 50 cents an hour in Quebec – to $9 an hour – added an extra $200,000 in wages to their operation. Parity with Ontario wages would be disastrous; their labour costs would increase by a staggering $500,000.

Unless the governments offer tax breaks to curb some of the burden of having to pay for housing and other related costs for foreign workers, the Charbonneaus say they might have to sell their land in Quebec and relocate somewhere else, where their cost of production would be more affordable. 

If the Quebec government opts to keep the minimum wage at $9 an hour, the couple worries their best foreign workers will flock to Ontario instead. The New Year will be pivotal, from every point of view. 

"$10.25 an hour is going to be an experiment," concludes Forth. If it doesn't pencil out he'll stop growing vegetables. He's certainly not prepared to invest a lot of money to expand. "Look at the guys who expanded in the hog industry," he adds. "Look at that fiasco. Those poor guys are done in a lot of ways. I mean who's next?" BF