As the overall economy keeps warming up, the U.S. unemployment rate now has reached a 10- to 11-year low at 4.3 percent in May 2017. That employment figure does nothing to help dairy farmers with their current labor and financial situation.

As the prospect for immigration reform remains uncertain, what is certain is that farm labor wages have climbed at a rate of 4 percent to 5 percent per year since 2014, depending on the regions.

At the same time, the dependence of the dairy sector on hired labor keeps growing. At the national level, the number of workers in dairy production rose by 3 percent per year over the last 10 years1 . That means that the average number of workers per dairy farm grew from 12.1 employees per reporting farm in 2006 to 14.7 in 2016. And in regions like the Eastern U.S. and the Midwest, the number of dairy farms reporting hired labor has increased significantly. By the end of 2016, 11.5 percent of Wisconsin dairy farms reported some hired labor, 13.5 percent of New York farms, and 22.4 percent of Michigan farms.

The escalating wages reflect a number of factors. One of them is the growing wage level across the economy and for blue collar jobs in particular. But the competition among dairy farms for a limited rural labor pool seems of even greater importance.

Over the last five years, states that have seen a larger growth in milk production and in the demand for dairy farm employees, such as Wisconsin, also have seen the highest increases in dairy farm wages.

This hints at a low level of labor mobility across regions and employment sectors. In other words, it is a challenge for dairy farms to recruit from other regions or other economic sectors, resulting in greater wage increases whenever the dairy sector expands in a specific state.

1 Based on the Quarterly Census of Employment and Wages of the Bureau of Labor Statistics which includes all employees covered by unemployment insurance programs.

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(c) Hoard's Dairyman Intel 2017
June 26, 2017
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