A letter sent to Congress on January 11 urging a freeze on increases in the adverse effect wage rate (AEWR) reflects increased frustration among American growers with federal guestworker requirements.
The AEWR is the wage that an employer hiring through the H-2A guestworker program must pay foreign workers. The name derives from the fact that this is the wage that supposedly prevents foreign labor from undercutting opportunities for American workers.
A comparison of the AEWR with the minimum wage on a state-by-state basis reveals sometimes astonishing discrepancies. In Georgia, the third-largest H-2A employer, the 2024 minimum wage remains the federal minimum: $7.25. The AEWR is over twice as much: $14.68.
The two largest states in terms of H-2A employees have wage rates that are less discrepant but still significant: Florida’s AEWR is $14.77, compared to a minimum wage of $12. In California, the AEWR is $19.75, compared to a minimum wage of $16.
The average AEWR nationwide is $17.55 in 2024, according to the congressional letter.
Some relevant details:
“First, half of H-2A jobs and workers are in five states, and these states have half of US agricultural employment covered by unemployment insurance (QCEW) and 44 percent of US direct-hire farm worker employment (FLS),” notes Rural Migration News from the University of California at Davis.
These five states are (in order): Florida, California, Georgia, Washington, and North Carolina.
A breakdown of costs, according to the same source:
“The cost of each Mexican H-2A worker is about $750 in government fees and processing costs and $500 to $750 to house workers at the US consulate and transport them to the US. Once in the US, H-2A workers earn $120 to $150 a day, and employers pay $10 to $30 a day to house and transport each worker from their housing to the fields.
“Over a typical six month or 25 week contract that involves to 125 to 150 days of US work, the extra costs of an H-2A worker over a US worker who is not housed or transported by the employer is about $5,000, based on $2,000 to get an H-2A worker to the US worksite and $3,000 at $20 a day for housing and food over 150 days. The wage bill for 125 days of work at $130 a day is $16,250, so the total costs of an H-2A worker are $21,250.”
By comparison, an employer hiring U.S. workers would have to pay payroll taxes ranging from 8 to 12 percent across states. “As a result, the extra cost of an H2-A worker over a U.S. worker is a net of $3,500,” says Rural Migration News. Consequently, “if H-2A workers are 20 percent more productive than the US worker, most of the extra H-2A costs disappear.”
The National Council of Agricultural Employers (NCAE) wants the federal Department of Labor (DOL) to hold hearings to find out whether in fact H-2A workers displace Americans, notes Philip Martin, a farm labor expert at UC-Davis. (There is a widespread opinion that they do not.)
Agricultural employers are also launching lawsuits to challenge DOL’s reclassification of many job categories (such as truck driving and pesticide application) as nonfarm work, subjecting employers to wages averaging $25 an hour or more, notes Martin.
“Maybe the purpose of this activity is to build a record so that, if there is a change in admin after elections, there could be a push to eliminate the AEWR,” Martin suggests.
