Higher N.J. minimum wage rankles small farmers

Tom Holtzhauser (left), with help from his cousin Bud Damminger, prunes peach trees in Mullica Hill. Due to increased labor costs, he says he may try to get by with four workers rather than the usual eight this year.
Tom Holtzhauser (left), with help from his cousin Bud Damminger, prunes peach trees in Mullica Hill. Due to increased labor costs, he says he may try to get by with four workers rather than the usual eight this year. (TOM GRALISH / Staff Photographer)
Posted: January 20, 2014

While workers trimmed peach trees at his Mullica Hill farm this month, Tom Holtzhauser was reluctantly mulling trims of another kind - to his workforce.

His labor costs will soar after the November passage of the constitutional amendment raising the state's minimum wage $1 to $8.25 an hour and implementing annual cost-of-living adjustments that could increase it even more.

The new cost, he said, puts him at a competitive disadvantage with out-of-state farmers who pay the federal minimum of $7.25 and no yearly adjustments.

The result: Holtzhauser may try to get by with four workers instead of the usual eight tending his 100 acres of peaches this season. The new wage measures "will be an absolute nightmare," he said.

In Hammonton, August Wuillermin faces similar concerns at his 250-acre vegetable farm, where he employs up to 40 workers and provides housing and transportation. He's also trying to figure out where he can cut costs.

The minimum wage can go up automatically - it took effect Jan. 1 - but "we don't get automatic price increases on our products," he said.

The new bottom-line realities in New Jersey's agriculture industry are now prompting Wuillermin, Holtzhauser, and thousands of other growers to make painful decisions.

They'll hire fewer workers and mechanize more of their operations, they said. Some will switch to grain crops, which can be harvested by equipment. And others may leave farming altogether - and sell their land - they said.

The indexed minimum wage was pushed by Senate President Stephen Sweeney and Democratic legislators who considered the $7.25-an-hour rate "woefully inadequate" for more than 300,000 state workers.

Nearly half of them are full time, and one quarter of those are parents, trying to feed their families and pay for housing on less than $16,000 a year, Sweeney said.

"We heard this same kind of 'the sky is falling' rhetoric the last time we increased the minimum wage," Sweeney said. "An increase in working wages should not be held hostage to the whims of politicians whenever they feel like getting around to it.

"People who work countless hours should not be condemned to a life of poverty," he said. "Raising the minimum wage was the right thing to do, and I'm glad the majority of New Jerseyans supported it."

This year, 21 states have minimum wages above the federally required $7.25, while others, such as Pennsylvania, Delaware, Virginia, North Carolina, and South Carolina, pay at the federal level. At least eight states, including New Jersey, have indexed automatic adjustments based on a cost-of-living formula.

That's the bigger problem, as New Jersey growers see it. Adjustments will be made each September, based on Consumer Price Index indicators that help measure the cost of living.

Farmers are "price-takers, not price-makers," said Ben Casella, a field representative and labor expert for the New Jersey Farm Bureau, a nonprofit advocacy group representing more than 11,000 farmers and other ancillary businesses in the state. "The price they receive is determined by the market and the availability of the product.

"You can't say we need $3 more a box [of produce] because it cost us more," he said. "But if the Consumer Price Index goes up, that will trigger a minimum-wage increase."

Farming - which already must meet many pesticide, water, and safety regulations - is different from other businesses, Casella said.

"Most of the workers are low-skilled; a lot of them live in housing on the farms at no cost to them, and are provided transportation," he said. "Some larger farms may have a kitchen where food is provided at a nominal fee.

"But in your general business, someone shows up, works, goes homes and pays for his own housing and benefits."

Many New Jersey farmers were already paying above the minimum wage to attract workers, who will now expect to receive the $1 increase and the adjustments, Casella said. "It's often referred to as the ratcheting effect," he said.The new cost of doing business has left growers "scared and worried," said Holtzhauser, 50, director of the New Jersey Peach Promotion Council, a nonprofit that promotes the state's peaches. "At least seven or eight farmers have gone out of the peach business in the last five years.

"I can only imagine what [the new minimum-wage measures] will do to the guys who are left," he said. "It will definitely hurt them. Who will be left standing?"

To remain competitive, farmers have to absorb the increased costs, Holtzhauser said. "We compete with South Carolina and California," he said. "They put the worst hurting on us.

". . . I love my business and don't want to see it go downhill," said Holtzhauser. "I have a 15-year-old boy and would like to see him do this - but this is a tough business."

Because of the indexed wage change, "I might have to get $11.50 or $12 a box [of produce] while a farmer from North Carolina asks for $10 a box," said Wuillermin, 61. Between the new labor costs and regulations, "I wish I would have done something else," he added.

At Eastern Fresh Growers in Cedarville, Cumberland County, Erwin Sheppard spends $25,000 a year on water testing and spent an additional $1.5 million for a new packing house in 2011 to safely store produce.

He hires workers from Mexico through a federal program that requires him to pay a minimum wage of $11.06 an hour. "I'm not in favor of [automatic] cost-of-living increases," said Sheppard, 64. "I'm in favor of letting supply and demand dictate the workforce.

"As the average age [of farmers] increases, it's going to be easier for them to make a decision to not farm or change what they grow if the health insurance costs also continue going up every year," he said. "If you have more than 50 employees and they average more than 30 hours a week, you have to provide insurance."

Twenty-five of Sheppard's 164 employees meet the full-time criteria. Last year, health insurance costs rose 60 percent. "All these challenges affect a businessman," he said.

At his 800-acre farm in Woolwich and South Harrison Townships in Gloucester County, Tom Sorbello was pricing some new equipment this month to further mechanize his operation. He has 80 farm hands, working more than 30 hours a week.

"If we can't survive, the consumer will have to pay more for the product," said Sorbello, 77. "If the volume is down, the price will go up."

Sorbello had already paid his workers more than minimum wage, believing "everybody deserves a little more money." But he also now has "to work it out so I use less men and get the same job done."

The minimum-wage increase and Obamacare "will have an effect" on farmers, Sorbello said. "The name of the game is trying to stay in business. If you can't survive, you close your doors."


ecolimore@phillynews.com

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