California is on track to have the highest minimum wage in the U.S., after Governor Jerry Brown signed a bill September 25 that will boost it to $9 per hour on July 1, 2014, and to $10 per hour on January 1, 2016. Washington has the current highest minimum wage in the nation at $9.19 per hour.
Although California's minimum wage is currently $8 per hour and labor is the largest milk production cost after feed, hay and replacements, the direct impact of a 25 percent higher minimum wage on dairies is expected to be minimal.
One reason is because most dairy jobs already pay more than $10 per hour. Another is that constant increases in production per cow, as well as automation that cuts the number of workers needed, tends to keep the cost of labor per hundredweight stable or nudge it slightly lower. Still, every new cost adds up for dairies that are already hard-pressed to meet operating expenses, let alone generate a profit margin that allows repayment of debt.
Longtime industry observers say indirect impacts are likely to have the greatest financial effect on dairies - the inevitably higher prices that will be passed on to dairies by suppliers and service providers.
"Where they are going to feel it is the people who supply goods and services used on farms," says Michael Marsh, CEO of Western United Dairymen in Modesto, Calif. "[A higher minimum wage] is going to raise their costs, which of course will be passed along to dairy farmers and will once again increase the cost of doing business in California."
The author has served large Western dairy readers for the past 36 years and manages Hoard's WEST, a publication written specifically for Western herds. He is a graduate of Cal Poly-San Luis Obispo, majored in journalism and is known as a Western dairying specialist.
Although California's minimum wage is currently $8 per hour and labor is the largest milk production cost after feed, hay and replacements, the direct impact of a 25 percent higher minimum wage on dairies is expected to be minimal.
One reason is because most dairy jobs already pay more than $10 per hour. Another is that constant increases in production per cow, as well as automation that cuts the number of workers needed, tends to keep the cost of labor per hundredweight stable or nudge it slightly lower. Still, every new cost adds up for dairies that are already hard-pressed to meet operating expenses, let alone generate a profit margin that allows repayment of debt.
Longtime industry observers say indirect impacts are likely to have the greatest financial effect on dairies - the inevitably higher prices that will be passed on to dairies by suppliers and service providers.
"Where they are going to feel it is the people who supply goods and services used on farms," says Michael Marsh, CEO of Western United Dairymen in Modesto, Calif. "[A higher minimum wage] is going to raise their costs, which of course will be passed along to dairy farmers and will once again increase the cost of doing business in California."
The author has served large Western dairy readers for the past 36 years and manages Hoard's WEST, a publication written specifically for Western herds. He is a graduate of Cal Poly-San Luis Obispo, majored in journalism and is known as a Western dairying specialist.
