Monthly Spotlight

Labor cost is a top concern for U.S. agriculture producers. While labor accounts for about 14% of total expenses on average, West Coast producers face the highest rates in the nation. For certain agriculture industries like tree fruit, tree nuts and nursery-greenhouse, labor costs can account for over a third of total production expenses. Changes to overtime laws and H-2A labor rates will further impact these costs, increasing the financial burden on producers and affecting their overall profitability.

Adverse Effective Wage Rates, 2024

Source: Department of Labor.

The Adverse Effective Wage Rates (AEWR) under the H-2A visa program, which allows foreign agricultural laborers to work temporarily in the U.S., are rising across the Western states. The AEWR sets the baseline rate for what agricultural employers must pay H-2A laborers and influences wages for domestic labor. In 2024, the H-2A program provided an estimated 25% of the total agricultural labor force in West Coast states.

Adverse Effective Wage Rates for H2A Labor

Source: Department of Labor.

In 2025, significant changes to agriculture overtime laws will take effect. Oregon will continue to reduce the allowable overtime hours from 55 in 2024 to 48 in 2025, which will further decrease to 40 hours by 2027. Washington has already implemented a similar program, reaching the 40-hour threshold for overtime pay in 2024. In California, overtime will begin at 40 hours for producers with fewer than 25 employees starting in 2025. Alaska, Arizona, Idaho, Montana, and Nevada all have overtime exemptions for agriculture.

The end of agriculture’s exemption from overtime regulations in Washington and Oregon will have significant impacts on producers. For instance, in Washington, total weekly wages for H-2A laborers increased by 16% year over year. Of this increase, nearly half is due to the projected rise in AEWR ($1.28 per hour) and the remaining to the expiration of the overtime exemption.

Rising labor costs and changing overtime regulations are putting significant pressure on producers, who will have to adapt by finding new ways to attract and retain workers, managing increased labor costs, and possibly investing in automation.

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