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The Iron Triangle and a piece rate-productivity standards database
December 21, 2017
Two major wage systems are used to pay hired farm workers: hourly wages and piece rates (some livestock and year-round workers are salaried). Most hired farm workers are paid weekly, and their earnings are the higher of the federal, state, or local minimum wage, the hourly wage, or their piece-rate earnings. Piece rate earnings are the product of the rate per unit of work times the number of units, such as $20 a bin for picking apples times five bins in an eight-hour day yielding $100 in daily earnings or $12.50 an hour.
Piece-rates are often paid when it is hard to monitor workers’ effort but easy to monitor their output, as with workers picking fruit in trees. Employers set piece rates so that the average worker earns more than the minimum wage, which provides an incentive to work fast without close supervision. Piece rates keep grower costs constant as worker productivity varies: the cost of picking apples is $20 a bin whether one fast or two slow workers pick the bin. However, worker earnings vary, and employers may terminate workers who fail to work fast enough to earn the minimum wage.
There is an “iron triangle” between the government-set minimum wage and the employer-set piece rate and productivity standard. For example, if the minimum wage is $10 an hour and the piece rate is $20 a bin, the minimum productivity standard is at least 0.5 bins per hour or four bins in an eight-hour day. Employers must “make up” the piece-rate earnings of slower pickers to at least the minimum wage, and may dismiss workers unable to pick fast enough to earn the minimum wage.
The H-2A program requires farm employers to ensure that US and H-2A workers earn the higher of the minimum, prevailing, or Adverse Effect Wage Rate (the AEWR is usually the highest wage). Employers specify piece rates in their job orders, and sometimes include a productivity standard. Once established, employers must justify changes to productivity standards, such as raising them because of changes that increase overall worker productivity.
Prevailing wages and piece rates are established by commodity and area by State Workforce Agencies whose staff survey employers and workers using Forms 232 and 232A. The availability and quality of piece rate data vary, especially because piece rate systems can be complex, varying within a commodity by the variety of fruit or vegetable and the stage of harvest.
There is no comprehensive piece rate and productivity standards data base. As more employers apply for H-2A workers, SWAs respond by conducting prevailing wage and practice studies, but these sometimes come too late to make decisions on whether productivity standards in job orders are appropriate.
An open wiki-style piece rate and productivity standards data base would be useful for:
There is no single piece rate and productivity standards data base. One report suggests that 30 SWAs submit an average 15 prevailing wage and practice surveys a year to DOL’s Office of Foreign Labor Certification, for a total of 450, and that OFLC requests an additional 100 or more ad hoc employment practice surveys when dealing with employer job orders for which there are no data. Most land-grant universities have extension services that publish costs and returns studies for specific commodities and areas, including the cost of pre-harvest, harvest, and post-harvest activities. Finally, DOL’s Wage and Hour Division and state labor law enforcement often reviews piece rates and productivity when determining if workers earned the minimum wage for all of the hours that they worked.
Bringing these and other sources of piece rate and productivity standards data together in a wiki-style database that could be easily updated would, over time, develop into the best source of data on employment practices and become an important tool for employers, workers, and government agencies.