A Look At Labor Costs For Farmers

A Look At Labor Costs For Farmers

Iowa State University ag economist William Edwards takes a look at today's labor costs for Iowa farmers.

More than 20,000 people make their living each year as full-time employees on Iowa farms. How much are they being paid? What other benefits or compensation are farmers who hire employees providing for their workers?

To get a better answer to these and related questions, Iowa State University recently conducted a survey of large-scale Iowa farms that employed one or more persons full time in 2011. The following results from that survey are based on 251 farm employees who worked at least 1,500 hours on a single farm in 2011, and were not related to the farm operator. William Edwards, Iowa State University Extension ag economist, provides analysis.

A Look At Labor Costs For Farmers

Average cash wages paid don't always reflect total compensation

* Compensation. The average cash wage paid to all employees was $33,320 per year, before deductions for taxes. However, this amount made up only 85% of their total compensation.

Besides wages, employees received $4,185 in the form of fringe benefits and $1,424 in the form of bonuses. The average value of all forms of compensation paid was $38,929 and varied from a low of $15,000 to a high of $81,345. In a similar survey conducted in 2005, the average farm employee received $34,640 in total compensation. The increase of $4,289 over six years represents an average annual increase of 2.1%.

The average cash wage paid per hour worked was $12.96. However, when bonuses and the value of fringe benefits were added, the average total compensation was $15.05 per hour. Factors such as farm size, education, employee duties, years of farm experience and supervisory responsibilities all had a major influence on how much an employee was paid.

* Gross sales. Farm size was measured by annual gross sales. Larger farms generally paid higher compensation. In particular, farms with annual gross sales of more than $2 million paid significantly more than smaller farms did. The average wage for employees on farms with less than $750,000 in gross sales $36,260 compared to $42,912 for employees on farms with gross sales more than $5 million.

The number of full-time workers employed per farm also increased with gross sales, from 2 to 5.4 employees.

* Duties. Even on farms with more than one enterprise, some employees specialized in just one area. The data in the table accompanying this article shows that employees who specialized in crops or swine production had the highest annual compensation. Those who specialized in dairy production, generally milkers, earned the lowest annual and hourly compensation at $30,658 annually and $12.03 per hour.

Employees who had supervisory responsibilities (such as managers) tended to be paid more.

Those employees who supervised at least one other employee (23% did that) earned an average of $44,574 in total compensation per year ($16.63 per hour). The 77% of the employees who did not supervise any other employees received only $37,270 per year ($14.60 per hour). Supervisors earned 20% more per year and 14% more per hour than non-supervisors.

Farm wages rise with farm size, education and experience

* Education. Total compensation was also related to the employee's level of education. High school graduates (59% of the total) received the highest average annual compensation at $40,433 per year. However, those with a two-year or four-year college degree earned the highest hourly compensation at $15.61 per hour. Employees lacking a high school diploma earned significantly less than average. They earned $32,089 per year and $12.34 per hour.

* Experience. Wages and other compensation tended to rise according to the number of years of farm work experience the employees had. Total compensation rose steadily from less than $35,000 for beginning workers to about $46,000 per year and nearly $17 per hour for employees with at least 20 years of experience, on average.

For more information about wages and benefits for farm employees, see files C1-60 and C1-61 on the Ag Decision Maker Website at www.extension.iastate.edu/agdm.



For farm management information and analysis, go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and ISU Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.

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