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Florida Tomato Growers Reject Penny-A-Pound Initiative At The Industry’s Peril

Jim Prevor’s Perishable Pundit, December 14, 2007

While much of the industry has been focused on an effort to explain to the American people and members of Congress that a severe labor shortage is hampering agriculture, the Florida tomato industry is acting in a manner that undermines the industry effort.

For many years, advocates for migrant farm workers have pushed for improvements in pay, living and working conditions for migrant farm workers that toil in Florida’s tomato fields. The advocates attempted to pressure growers to boost pay, but it was difficult to find leverage points that would move growers to pay more — especially since, in the absence of buyers willing to pay more, any pay increase for pickers would come right out of the growers’ pockets.

Eventually, though, the advocates for the migrant workers hit upon a strategy more likely to have success. Instead of pressuring anonymous farmers, they would attempt to pressure foodservice operators.

It was a brilliant strategy on two accounts:

First, these consumer brand names ran real reputational risk in being tarred as responsible for low wages and poor working conditions. As such, they were susceptible to public relations campaigns singling them out as villains. Boycotts by “consumers of conscience” could really hurt these businesses — in a way they could not hurt any anonymous tomato farmer — and therefore created a real incentive for these foodservice operators to head off boycotts and protests.

Second, focusing on the foodservice operators accurately reflected the economics of the situation. Tomato farming is not so wildly profitable that individual tomato farmers could unilaterally decide to dramatically increase their labor costs. On the other hand, the cost of tomatoes in most foodservice applications — say a slice of tomato on a hamburger — is sufficiently small as a percentage of total ingredient costs or total item price that it is feasible for foodservice operators to contemplate an increase in tomato costs. In addition, foodservice operators have greater control over menu prices, and thus greater ability to pass costs onto consumers than do farmers selling a commodity.

The strategy bore fruit when Yum! Brands — which owns KFC, Taco Bell, Pizza Hut and other fast food restaurants — decided to participate in a so-called “penny-a-pound” scheme by which companies would agree to pay an extra penny a pound for tomatoes and the penny would be paid directly to workers.

For reasons unknown, the Florida growers refused to make the bookkeeping easy and simply add the penny-a-pound supplement to each worker’s paycheck. Instead a somewhat awkward mechanism had to be developed whereby a third party actually issued separate checks to the workers.

The Yum! Brands program had two successful seasons, and then the advocates for the farm workers scored a big breakthrough: McDonald’s, the great giant of the foodservice world, decided to join the penny-a-pound scheme.

The consequences of this decision would be expected to be far-reaching. Not only would this represent an immediate and substantial supplement to the incomes of many tomato pickers, but the precedent set by having McDonald’s — often benchmarked against for best practices — adopt this policy seemed to herald a day when many more buyers would join the penny-a-pound plan.

Beyond this, once the principle of buyer responsibility for farm-worker conditions was so clearly established, surely a penny a pound would not be the end of things. Over time, perhaps the increment would be increased or the responsibility would broaden to include health insurance and other benefits.

For those who advocated for the tomato pickers, it seemed the dawning of a great new day… but it was not to be.

Although the program had been operating for two years with Yum! Brands and the third party making payments to laborers, all of the sudden, the Florida Tomato Growers Exchange declared that the program was a violation of antitrust laws — although it cited no legal opinions nor court decisions to buttress this assertion. It even announced that any members who elected to participate in the scheme would be fined substantially. As a result, no growers are participating this season. And, so, for the moment at least, the program is dead.

The workers who were getting extra checks from Yum! Brands for the last two years suddenly find themselves living without this supplement. Those who would have benefited as McDonald’s massive purchases began to pay a premium also do without.

Both Yum! Brands and McDonald’s have said they will continue to buy Florida tomatoes, pointing out that they won’t help the workers by refusing to buy and thus causing them to be out of work.

It is not clear why the Florida tomato growers have taken this tack. The antitrust argument is transparently absurd. If a buyer announces it wants to pay all the employees of all its suppliers a bonus, the suppliers commit no antitrust violations by facilitating that act. The only antitrust violation here might be the one the Florida Tomato Growers Exchange could be committing by trying to prevent growers from contracting with whom they choose. The Exchange hopes the laws on co-ops will protect it.

One supposes that the tomato growers feel the buyers will negotiate tougher on price since the growers know they have these supplemental payments to make. Yum! Brands is small enough that the market was established independently of its purchases, so a supplemental amount could be figured on top of the market. If McDonald’s joined the program — and certainly if it expanded to include Burger King and others — the folks pushing the penny-a-pound deal would constitute the market.

Still, the argument is weak because it is also true on the other side. When growers set wages for laborers, those laborers will now be aware of any supplements they might receive from the buying groups. So just as restaurants can pay low wages to waiters because of the certainty of tips, the greater the likelihood of farm laborers receiving supplements, the less farmers will have to pay to attract laborers.

In fact, the irony of all this controversy is that, although in the short term these programs may result in a bonus for the workers, in the long term pay rates adjust for the presence of supplements and thus these plans, carefully created by worker advocates, won’t actually help workers at all. To do that, the buyers have to dictate total compensation, not a supplement.

The only real explanation for the obstacles that the Florida Tomato Growers Exchange is that, although there are individual exceptions, this is a defensive industry that needs to start playing offense.

We saw this quite recently when Florida’s tomato farmers tried to crush the UglyRipe tomato by applying cosmetic grade standards that were obviously inappropriate to the variety. We wrote about this controversy in the Pundit both here and here as well as in a column in Pundit sister publication, PRODUCE BUSINESS, which you can read here.

The farmers lost that battle, but that was only because they picked the wrong enemy. Joe Procacci and the Procacci family do not get rolled. They fought in the courts, they fought in regulatory agencies, they fought in the Press. More than once Joe Procacci himself thought to pick up the phone and draw some issues to the attention of the Pundit.

The Florida Tomato Growers Exchange is hoping that the farm workers and their advocates, mostly small religious groups representing the nascent “consumers of conscience” movement, will not be as tenacious. In the short term, the Florida tomato growers may get their wish but, in the long term, both the tomato farmers, and the broader industry, shouldn’t count on it.

The issue for the Florida tomato industry is that in the new world of emphasis on corporate social responsibility, the industry would do better to position itself as a leader rather than a retrograde industry.

A few years ago, as pressure began building on the Florida tomato industry over worker issues, the leadership put together an organization to certify farmer compliance. In a textbook example of how certifications can be abused, when one studied the certification, it basically certified nothing more than that the farmers were obeying the law.

The Pundit had the chance, at the time, to hear a presentation about the certification as it was being established and in the room were several people who worked in the produce trade in Europe and Australia. Everyone was polite while the speaker presented, but when he left the room, one of the foreigners slapped the table and said “Well, that brings the industry all the way up to the 19th century. Did they ever hear of EurepGAP?”

Right now, many think that sustainability and corporate social responsibility mean locally grown and solar panels on the roof, but as we have been warning the industry the actual vulnerability of the industry is labor issues.

If you think about all the problems Kathie Lee Gifford had because her clothes were being produced in “sweatshops” and ask how we will stack up when scrutiny starts to be paid to working conditions and compensation both of migrant workers in the US and field workers in developing countries, the challenge ahead is obvious.

To its credit, the Florida Tomato Growers Exchange has tried to move ahead on some key issues such as food safety, and we chronicled those efforts in an interview with Reggie Brown right here. We have applauded these efforts.

On labor, though, the association keeps pointing out that the hourly earning of tomato harvesters, when working, is almost double the Florida minimum wage of $6.67 per hour, as the Exchange explains in a recent press release condemning the "professional activists":

This season’s payroll records show that Florida tomato harvesters’ hourly pay ranged from $10.50 to $14.86, with an average of $12.46 per hour. The harvesters earn more than double the current federal minimum wage of $5.85 per hour and nearly double Florida’s minimum wage of $6.67 per hour.

The farm workers harvest tomatoes an average of 25 to 30 hours per week in addition to other tasks on the farm. For most workers, the tomato harvest in Florida is only part of the work they do during the year. Many move on to other regions to harvest other crops throughout the growing season.

The problem is that these positions are not like offering a city kid a chance to make $15 an hour after school; these are full time jobs and the relevant issue is going to wind up being what kind of life can people lead doing this work? Can they make enough money to support a family and raise good children who, one day, will be productive citizens?

The very fact that the Florida Tomato Growers Exchange is so focused on the hourly wage and not the annual earnings shows a disconnect with not only how they will be evaluated but how the entire produce industry will be evaluated.

It is not the wage but the situation we must pay attention to. We could set up a summer program and invite college students from around the world to come and work on our farms during summer vacation. We could feed and house them, and as long as we kept them safe and gave them the opportunity to experience America — nobody would care what they earn. Students from around the world have been going to work for free on the Kibbutzim in Israel for many years.

But if we are going to ask adults to make this a full time job, the industry will not be allowed to be indifferent to the conditions in which our workers live and their children are being raised.

We have no delusions that this is a morally easy issue. If we raise wages, it could lead to the American industry not being competitive with third-world suppliers. It is far from clear that workers would be better off staying in their home countries rather than coming to the U.S., whatever the wage.

Yet it strikes us that this decision has, in a sense, been made for us. If we can’t compete with seamstresses toiling day and night in unsafe conditions in third-world countries, we can try to compete with technology, we can even try to compete by attempting to get the developing country to impose its own labor and health regulations, but Americans would sooner the industry leave the country than have a “race to the bottom” in which we remain competitive by allowing people in the U.S. to live and work in degrading conditions.

And hard, outdoor, irregular work, without health insurance or retirement programs, in which during a year a man will not make enough to boost a family out of poverty, will inevitably be seen as degrading.

From a broader industry perspective, five points stand out:

1) Are farm workers in short supply?

The Florida Tomato Growers Exchange position on labor places the trade’s efforts on AgJOBS in a whole new light.

If the problem is a labor shortage, one would think the Florida tomato growers would be thrilled to have a customer offer extra payments to workers — payments helpful in enticing more people into this line of work.

The new season in Florida just started recently. As awareness of what is going on in Florida grows, it will undercut everything industry leaders have been saying in their push to see AgJOBS passed.

The crucial claim of the campaign for AgJOBS is that farm workers are deeply valued and in short supply. Yet this action by the Florida Tomato Growers Exchange sends the opposite message — farm workers are not valued at all and they are a dime a dozen. After all, they are in such good supply that the Florida tomato growers seem unwilling to see them make even a penny a pound more.

It will be difficult to sustain a position that crops are going unharvested when Florida’s tomato growers reject this kind of initiative.

2) How much of a burden are these workers on our communities?

The Pundit is based in Boca Raton, Florida, and in that generally affluent city there are many charities focused on helping migrant workers. The Pundit has received many letters such as this one in which industry members blame immigrant farm workers for causing crime, etc.

If the industry is going to urge that the US allow a substantial population of immigrants to do this work, we better be able to demonstrate that these workers are not a burden to society.

In other words, things such as health insurance may not be necessary to attract the workers, but we have to provide it so that we can assure the public… and the policymakers… that our workers aren’t freeloading off the local hospital when they get ill.

Much of our industry effort has been devoted to getting out the message of what we in the industry need from immigration reform. We have not succeeded in getting that kind of reform. Perhaps the next step is listening, really listening to those with different concerns — like ill-prepared migrant children burdening the schools or uninsured populations burdening the public health system — and start to develop actual responses that will alleviate these concerns. Then we might be able to actually pass some version of AgJOBS.

3) Yum! Brands and McDonalds can’t get off so easy.

The mere fact that the Florida Tomato Farmers Exchange has said no should not allow Yum! and McDonalds to do nothing. At very least, they should commit to putting the penny a pound into a foundation to help migrant workers.

More broadly, this whole issue is about creating a supply chain aligned on certain values. Food safety may be one, labor treatment another; the penny-a-pound initiatives are a start, but a gimmicky one, since, as we discussed above, there is no way to assure that, over time, wages won’t be depressed by the existence of supplements.

But it is unreasonable to think that corporate leaders such as these can turn a blind eye to the working conditions of the employees of suppliers. In the end, they will have to articulate standards and refuse to do business with those who don’t meet these standards.

4) One wonders if there isn’t a role in solving this problem for PMA or United.

Part of the problem is that migrant workers can work for many different employers over the course of only one year — and even more over several years. We need a mechanism whereby these people could participate in one health insurance plan, one 401-K plan, etc., regardless of where they are working that week or that year.

This is not really that difficult. Most unionized terminal markets, for example, have union-run plans in which the particular firm the employee is working for that week has no bearing on the employee’s benefits.

Well, why couldn’t PMA or United offer an industry-wide plan where seasonal or temporary field workers, working for anyone in the business, could keep the same pension and medical plan?

If the nationals aren’t interested, how hard would it be for WGA to extend its already substantial insurance operation to offer such a plan nationally, perhaps in conjunction with other regional associations?

What a great boost for the industry… and for AgJOBS… if we could announce a national initiative to provide health insurance and 401-Ks for our field and packing house labor.

5) Abuse of cooperatives.

The Florida Tomato Growers Exchange is, technically, a co-op, yet its activities in this case — threatening to fine companies that want to cooperate with the penny-a-pound initiatives — are so far from any purpose for which co-ops were created that it may lead to someone questioning the whole idea of co-ops. Is that a positive step for the industry?

It is a truism now that in food safety, the industry will be judged by its weakest link. We should not think that any less so on issues regarding labor relations and social responsibility.

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