Linda Benedict, Mishra, Ashok, Gillespie, Jeffrey M. | 9/12/2013 8:28:11 PM
Ashok K. Mishra, Hyunjeong Joo and Jeffrey M. Gillespie
Louisiana has been the largest seafood-producing state in the contiguous United States and the largest producer of oyster, shrimp, crab, crawfish and alligator in the United States. One of every 70 jobs in Louisiana is seafood-related with a total economic impact of more than $2.4 billion. Many of these jobs are in family-owned companies that have worked for generations to produce seafood for domestic and world markets. These jobs and natural resources are of value not only to the industry and local businesses, but also to Louisiana residents and communities. Seafood is a point of pride for Louisiana and an integral part of the coastal culture.
Louisiana’s seafood industry has, however, faced a multitude of challenges over the past two decades. Beginning in the early 1990s, farm-raised seafood products from overseas stormed the domestic market, exposing Louisiana producers to fierce competition against foreign producers who rely heavily on much cheaper labor. In 2005, Hurricane Katrina displaced many seafood businesses and left lasting scars on the state’s industry. It became extremely difficult for seafood Photo producers to recruit local workers, most of whom found better paying jobs in the booming post-hurricane clean-up industry. In 2010, the industry was again hit by a disaster in the form of the BP oil spill.
Amid the growing challenges looms another concern to Louisiana seafood businesses – this time by new legislative actions to raise wages and extend benefits for legally-supported foreign workers under the temporary visa program called H-2B. In the face of significant labor shortages, Louisiana seafood businesses increasingly rely on H-2B workers, despite substantial upfront costs to participate in the program. Many of the participating businesses must consult with lawyers to assist with the complicated visa application procedure. Once petitions for foreign workers are approved, sponsoring employers must provide transportation, housing and meals to H2-B workers in addition to competitive wages in the local labor market.
The new legislative effort to raise wages and extend benefits for H-2B workers will make it more difficult for Louisiana seafood businesses to secure a sufficient work force. In this article, we provide insights into the economic impacts of H-2B visa workers on Louisiana’s seafood processing industry. This analysis may aid elected officials in evaluating whether policies should be revised; extension agents in targeting gaps in their parishes that can be proactively addressed; and farm operators in assessing the landscape of their profession as they look toward the future.
H-2B Visa Workers in Louisiana
Since 2005, the Louisiana seafood processing and packaging industry has employed a considerable number of H-2B visa workers, temporary workers hired from other countries for seasonal industries (Table 1).
Table 2 shows average prevailing wages of H-2B workers for seafood-related and all other jobs in Louisiana between 2007 and 2010. Average prevailing wages are much lower for seafood-related jobs than for all other jobs. The lower average wage indicates the difficulty of seafood-related business owners in securing domestic labor.
Macroeconomic Impact of H-2B Visa Workers on the Louisiana Economy
Because of a lack of information and data on several key variables, we worked from the following scenarios and assumptions to estimate the economic impact of H-2B visa workers in Louisiana. These are:
With this in mind, we used the IMPLAN Economic Modeling program to find that:
Louisiana Sea Grant funded a study that enabled us to collect data from Louisiana seafood processors through a survey. These data were used to make some comparisons of wages and numbers of workers. They could also shed light on the demand and supply of workers, both domestic and foreign (H-2B), and preferences for workers by Louisiana seafood processors.
Employers were queried on the wage structure for domestic, immigrant (non-H-2B), and nonimmigrant (H-2B visa) workers. Employers were queried on wage rate (wage/hour) and piecemeal wages ($/pound) for both types of workers. Table 3 indicates that: (1) during 2008-2011, wage rates for both types of workers rose; for example, the wage rate for non-H-2B workers increased from $9.37/hour in 2008 to $10.35/hour in 2011, while the piecemeal rate increased from $1.66/pound to $1.86/pound. (2) The wage rate for H-2B workers has been lower than for their counterpart. For example, in 2008, H-2B visa workers earned about 13 percent less than their counterpart, and this wage gap widened in 2011 to about 18 percent lower. Finally, the piecemeal rate for H-2B workers increased from $1.62/pound to $1.81/pound during the same period. Nonetheless, the piecemeal rate for H-2B workers was about 5 cents/pound lower than for their counterparts.
Employers were queried on nonwage, or fringe, benefits including vacation, health insurance, housing and transportation. Not surprising, among domestic and immigrant workers (non-H-2B), vacation (25%), meals (13%), other non-wage benefits (21%) and other incentives (17%) were higher; however, among nonimmigrant (H-2B visa) workers, transportation (30%), housing (25%) and other nonwage benefits (25%) were higher (Table 4).
The most likely document kept by employers of nonimmigrant (H-2B visa) workers was Social Security cards (50%), followed by passports/visas (30%). About 80 percent of the employers were confident their H-2B visa workers had proper documents to work in the United States.
Finally, only 50 percent of the Louisiana seafood processors used the Department of Homeland Security’s E-Verify program to verify their foreign-born employees. When queried on employee turnover rate, 22 percent of Louisiana seafood processors indicated a 10 percent turnover rate, while 9 percent indicated a 20 percent or higher turnover rate.
Labor Shortage and Solutions
Figure 1 shows that labor shortages could lead to increased prices for some or all products, cancelling expansion of seafood processing businesses and decreasing operational efficiency. For 32 percent of respondents, capital loss was also an important factor. Respondents were asked if they would face a labor shortage in 2013, and 60 percent indicated they anticipated one. About 29 percent of respondents indicated they expected about a 50 percent labor shortage in 2013, followed by 21 percent anticipating about a 30 percent labor shortage. About a third of respondents indicated the reason for the labor shortage was "few applicants." About 22 percent indicated they could not offer the asking wage rate, and a similar percentage faulted the high turnover rate. Finally, 56 percent of Louisiana seafood processors indicated they had faced a labor shortage in the past two years.
When respondents were queried on the solutions they have considered and applied to mitigate labor shortages, most of them indicated "reduced operations." According to Figure 2, seafood processors have also considered reducing raw materials and ceasing operations as possible solutions to labor shortages. Only 10 percent to 14 percent have considered raising wages.
Summary and Conclusions
The Louisiana seafood processing and packaging industry heavily relies on H-2B visa workers, temporary workers hired for seasonal work, mainly from Mexico and Central America. The U.S. Department of Labor proposed higher wages for H-2B workers in January 2012, after a federal court struck down guidelines for the program crafted by the Bush administration.
Our survey of Louisiana seafood processors found that the share of labor cost in total cost could range from 20 percent to 40 percent. Findings show that over the 2008-2011 period, wage rates for both non-H-2B and H-2B workers rose. With respect to nonwage benefits for H-2B workers, employers provided workers with transportation, housing and other nonwage benefits.
We found that a labor shortage could lead to increased prices for some or all products, cancelling expansion of seafood processing businesses and decreasing operational efficiency. In response to increased wages for H-2B visa workers, employers would consider decreasing/ceasing production, with some having already ceased production and some indicating increasing their product prices as ways to reduce the financial impact on their businesses. About 33 percent of employers strongly agreed that if Congress does not change wages for H-2B visa workers, then seafood processors could hire enough labor for their operations. Finally, about 92 percent of the respondents indicated that they will not exit the seafood processing industry.
Ashok K. Mishra is a professor; Hyunjeong Joo is a graduate research assistant; and Jeffrey M. Gillespie is the Martin D. Woodin Endowed Professor, all are in the Department of Agricultural Economics & Agribusiness.
(This article was published in the summer 2013 issue of Louisiana Agriculture magazine.)