In her State of the State address this year, Governor Kathy Hochul floated a proposal to subsidize farm owners as they make a transition to a new standard for overtime pay.
In general, I’m wary of paying employers to do what they should be doing anyway. But, if done right, this proposal could make a leap past existing obstacles to put New York’s farm economy on a stronger footing. That would be good news for both farm workers and farm owners, with rippling benefits to all of us who enjoy local produce and bucolic landscapes.
Farm owners in New York State currently pay overtime only to employees who work more than a grueling 60 hours a week. A farm wage board is considering whether to bring that threshold in line with the 40-hour threshold that applies to other businesses.
Even without a subsidy, a 40-hour threshold would be manageable for farm owners and good news for farm laborers. In 2019, when the state still had no limit on the number of hours farm laborers could work without getting overtime pay, Maggie Gray, Olivia Heffernan and I published a report for the Fiscal Policy Institute projecting the likely impact of a 40-hour threshold. We found that it would benefit workers and communities, while being affordable for farm owners.
One aspect of overtime pay that is under-appreciated is the ways it will provide an incentive for the farm owners to increase productivity. We have seen a similar effect across the country in businesses that have had to adjust to a higher minimum wage. When employers are required to pay a higher minimum, employees benefit, but the cost to employers is not dollar-for-dollar. Managers can find cost savings by reducing turnover, making investments in equipment, or spending more time training workers.
What does this look like for farming? Farm owners are more likely to invest in equipment that can make workers more productive, like apple-picking machinery. They may outsource some tasks that can be done by outside companies, like manure spreading. And, though worker housing costs and a tight labor market limit how much farm owners can hire more workers, they may hire a few more as a way to ease the pressure of hours per worker.
Pushing farm owners in this direction is not only good for workers, it’s good for the industry as a whole. Relying on a business model built on exploitation of workers—who are overwhelmingly foreign-born and people of color—is not sustainable in the long run. Creating a new normal in which farm workers earn a decent weekly wage while working a more reasonable number of hours is a far more sustainable business model.
The few sentences in Governor Hochul’s State of the State address that talk about a new Overtime Tax Credit are for this reason promising, if still vague.
In order to provide the proper incentive to farm owners, the credit should start high, but then be phased out quickly. A 100 percent credit would be a terrible mistake. It would encourage working farm laborers even harder, and provide no incentive to find productivity gains.
What would make more sense is a partial credit that phases out gradually as farm owners adjust. How much would this cost the state?
Let’s assume a 40-hour overtime threshold. That would be good news for workers and, if the state is subsidizing a transition, it should be very workable for farm owners.
And, let’s assume a subsidy that starts at 80 percent, then goes to 60 percent in a year or two, then 40 percent, then 20 percent, and then down to zero.
We can get some general sense of the cost from the Farm Credit East report of two years ago. That report projected that the move from no overtime requirement to a 40-hour threshold would cost farm owners about $120 million. A full estimate today should account for the fact that the overtime threshold of 60 hours is already in place. And it should also incorporate cost savings due to productivity gains.
But, to make a back-of-the envelope calculation, the cost of the first year, at an 80 percent subsidy, might be about $96 million. The steps to 60, 40, and 20 percent would reduce the cost to the state in future years to $72 million, $48 million, $24 million. And, of course, a full phase-out would bring the farm sector in line with other businesses, and would eventually not put a burden on future state budgets.
It is not clear that what the governor is proposing is this kind of partial subsidy and eventual phaseout. But, a step like this would be a real win for the present and future of New York farming.