Do you work in the food industry? If so, you’re in good company. After all, nearly 12.5 million people work in the food industry. That’s a lot of people. No wonder the largest portion of your food dollar goes to pay their salaries. Labor accounts for 38% of the total food marketing bill. That’s why, historically, whether you’re eating at home or away from home, as the price of labor increases, so does the price of food. That’s important to know when you hear that last year, food manufacturing costs were up 3.5%.   Labor costs are also going up for food service workers and restaurant employees. (Check out the grocery dollar breakdown.)

Minimum Wage
In May 2007, President Bush signed a spending bill that boosts the federal minimum wage in three steps:

• $5.85 per hour effective July 24, 2007
• $6.55 per hour effective July 24, 2008
• $7.25 per hour effective July 24, 2009

This increase reduces the profit margins throughout the food chain. Because this increase is continual until mid 2009, it is difficult for restaurants and food service businesses to absorb the cost. In order to remain competitive – or even stay in business – they have to pass on the cost to consumers.


Healthcare
The cost of healthcare benefits has escalated.   According to the USDA, health benefits became the #1 issue on the bargaining table at food companies. Benefits total about 20-25% of food industry labor costs.  Food companies are learning to cut costs, though. Learn more.

Border Closings
Tighter restrictions on legal guest workers from Mexico have caused a labor shortage. As a result, some farmers have drastically increased wages. Others aren’t so fortunate. With the supply of rural laborers at an all time low, they can’t hire anyone and are cutting back their plantings of crops which require a lot of labor.  Fewer crops harvested mean higher costs at the stores.

Sources
U.S. Dept. of Agriculture
U.S. Department of Labor

Copyright © 2008 Illinois Agricultural Association ®