SANTA CRUZ (California) SENTINEL

July 30, 2017

 

How Gilroy’s Christopher Ranch fixed its labor shortage: a pay increase

By Lisa M. Krieger

 

GILROY >> All over California, there’s a desperate labor shortage on farms, ranches, processing and packing houses.

But at Christopher Ranch — the nation’s largest producer of fresh garlic and co-founder of this weekend’s Garlic Festival — every job is filled. Even now, at the peak of harvest season, all 600 of its packing and processing positions are claimed.

Its simple yet oh-so-complex and controversial remedy: a pay increase. Faced with 50 empty positions last summer, in January it hoisted entry-level wages 18 percent, from $11 to $13 an hour — and applications flooded in, creating a wait list of 150 people. Another increase is promised next year, to $15 an hour.

Remarkably, costs stabilized. And business grew.

As California moves towards a higher minimum wage, Christopher Ranch offers a glimpse of the future that could be brighter for both workers and farmers, with a more reliable workforce, bigger paychecks and rising standards of living.

Or it could be an isolated success story. At farms with greater price pressures, less brand loyalty and weaker market leverage, these wages could break budgets — forcing agriculture to abandon a state with unparalleled soil, climate and crops.

“We can’t beat everyone on price,” said Ken Christopher, 32, who pitched the idea first to his father, then his grandfather. “But we can beat them on quality, customer service and dedication to corporate social responsibility.”

When Christopher Ranch was founded in 1956, farmworkers were plentiful and wages stable. But now a combination of factors means fewer willing hands. The farmworker population is aging. Their children are getting college educations.

In Mexico, there are new economic opportunities. The birthrate has declined. And it’s harder to cross the border, both legally and illegally. Immigration reform has stalled in Washington, D.C., and President Trump has stepped up enforcement at the border, which had already tightened under former President Obama.

“As migration drops, it becomes more important to keep the best workers around, so farmers are willing to do that,” said Jeffrey M. Perloff, a professor in the Department of Agricultural and Resource Economics at the University of California at Berkeley.

Most visible is the decline of field workers, who are paid incentive or piece-rate wages, such as $20 to pick a 1,000-pound bin of apples. This summer, shortages are reported from the walnut orchards of Solano County to the lily fields of Del Norte County and the vineyards of Sonoma and Napa. Joe Del Bosque in Firebaugh, like some other growers, said he sometimes must leave melons in the field.

But processors and packers — like Christopher Ranch, where workers clean, trim, crack, sort, peel, roast and puree 90 million pounds of garlic every year — also face shortages.

“When there are supply problems out in the field, you typically see that apply over to the first lines of production,” said Ryan Jacobsen, president of the Fresno Farm Bureau. “The problem in packing and processing is very reflective of what is happening out in the fields.”

There’s no hard data on average earnings for California’s packinghouse workers, but the job is a step up from field jobs, so it’s likely to be a bit above minimum wage, according to the Western Growers Association. Packinghouses in the Monterey-Salinas area typically pay $12.00 to $12.50 an hour, according to Lauro Barajas of the United Farm Workers.

For Christopher Ranch, the crisis came to a head last summer, with 50 empty positions, or 10 percent of its workforce.

“Our throughput went down. We turned away sales. We couldn’t get things made,” said Ken Christopher.

Even worse, the company had to bring in overtime workers, causing costs to skyrocket.

Christopher, with an MBA from the University of San Francisco, heard about the “Fight for $15” movement to boost wages, and decided to run the numbers. Concluding that they could afford it, he proposed the idea to his father, Bill Christopher, who studied economics at Stanford. Together, they pitched it to company founder Donald Christopher.

“It was a little bit of a shock,” Ken Christopher recalled. “But I showed them the math.”

Workers say the pay raise helps stretch their tight budgets.

“You can see it in your paycheck,” said Marcos Navarro, 23, a mechanical engineering student at San Jose State University who previously worked at Kmart for $11 an hour. “It helps with rent, gas, living expenses and books.”

Garlic peeler Jesse Ortega, 55, left his job as a cook in San Jose, where he made $11 an hour but the days were short and unpredictable.

“I’ve got five kids at home,” he said. “Now we can go places. Before we were stuck at home.”

Some — like Jasmin Alvarado of Los Banos, Ilse Denise Torres of Hollister, and Ricard Bernal Salmaron of Seaside — say the extra money makes their longer commute worthwhile — and is better than what they can find near home.

There was one surprise: Wage inflation for other positions, like forklift operators, mechanics and supervisors. When these 400 higher-skilled workers got news of the raise, they wanted one, too. So their $18 to $19 an hour salaries will climb above $20 in the near future.

“It was an emotional response that I wasn’t prepared for. It was an unexpected cost,” said Christopher. “But we’re getting the labor we need.”

The entire state will soon follow. California’s minimum wage rises by $1 an hour each January to $15 an hour by 2022, then will increase with inflation until 2024.

Most farmers lament the increase, saying that labor costs are already rising rapidly due to the Affordable Care Act, paid sick leave and overtime rules. The cost of farming has risen 36 percent over the past five years; seeds, fertilizer, electricity and water have all become significantly more expensive, according to Tom Nassif, president and CEO of Western Growers Association.

“Add an increase in labor costs to the mix and you will only accelerate a trend that we have been observing over the past decade — the shifting of hundreds of thousands of acres of current and future California farms to other states and countries,” he said.

There are good reasons why the Christopher Ranch strategy might not work for other growers: The company is “vertically integrated” — it controls its product from seed to packaging — so it has options for cost-cutting that growers of commodity crops, such as tomatoes, do not. And consumers willingly pay more for this storied California brand, rather than cheaper Chinese or Spanish garlic. In contrast, commodity growers face lower brand loyalty and fierce price wars; global markets don’t care whether their fresh produce comes from California or somewhere else.

Meanwhile, companies that pay premium wages just pull workers from elsewhere, said UC Davis agricultural economist Philip Martin. “They tend to cream off the best workers….It’s like when everybody wanted to work for IBM.”

Higher wages and rising labor costs are prompting farmers to pursue four strategies, which Martin calls “stretch, substitute, supplement and satisfy.”

Stretching the workforce with tools like conveyor belts or hydraulic platforms can boost productivity and make work easier. Substitution of workers with machines creates enormous labor-saving changes in crops like corn, cotton and rice, although it’s harder with fragile fruits and vegetables. Supplementing the workforce with H-2A guest workers is another approach.

The fourth strategy is to satisfy workers — taking steps to make them feel wanted. Christopher Ranch offers on-site child care, college scholarships and pays all health insurance premiums. And — now — better pay.

“Our goal is always to stay one step ahead,” said Christopher. “The last thing we want to have an eroding workforce and be caught flat-footed. We want to stay competitive.”