AEWRs, Piece Rates, and H-2As

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October 10, 2023

The H-2A program allows farmers who anticipate labor shortages to be certified by DOL to recruit and employ H-2A workers to fill seasonal jobs that generally last up to 10 months. Farmers must offer and pay the highest of four wages to H-2A workers and US workers in corresponding employment, the federal or state minimum wage, the Adverse Effect Wage Rate (AEWR), the prevailing wage rate (PWR), or the wage negotiated in a collective bargaining agreement.

The PWR can be an hourly or piece rate. There are very few PWRs in the OFLC agricultural online wage library, including none for Florida, the state with the most jobs certified to be filled with H-2A workers.

OFLC has no PWRs for Florida, the #1 H-2A state

Piece rates. Most farm workers are paid via two major wage systems: hourly and piece rate. The earnings of hourly workers are hours worked times the hourly wage, while piece rate workers are guaranteed a minimum wage but can earn more if their earnings of a wage per unit of work times the number of units exceeds the minimum. If the minimum wage is $15 an hour and the piece rate is $30 for each bin of apples picked, and then a worker is guaranteed $120 in an eight-hour day but earns $180 by picking six bins, equivalent to $22.50.

Hourly wage systems are most common, and typically offer the minimum wage or the AEWR, which ranges from $14 to $18 per hour. Some employers pay $0.50 or $1 an hour more than the state or federal minimum wage to attract the best workers.

Work is the exchange of effort for reward: workers give employers control of some of their time in exchange for wages and benefits. The nature of the work and the characteristics of workers affect supervisory challenges and influence the wage system.

Most farm workers are paid hourly wages, and the major supervisory challenge is to monitor the quantity of work done. This is done in many ways:

• a working supervisor can set the pace of a hoeing or weeding crew as it moves through a field
• a moving conveyor belt can set the pace of harvesting for a crew that follows behind to harvest lettuce or melons and place them on the belt
• supervisors can announce how much irrigation pipe or other work they expect to be completed in an eight-hour day or other time period

Supervisors are often embedded in or close to hourly work crews to monitor both the quantity and the quality of their work.

Piece rate wages allow farm employers to estimate the cost of getting work done and motivate workers to work fast when it is difficult to monitor their speed of work, as when workers are picking fruit in trees. Farmers who set a piece rate of $30 a bin to pick apples can estimate the cost of getting their apples picked and encourage fast work.

Pros and cons of hourly and piece rate wage systems (all workers are guaranteed a minimum wage)

Difference Between Piece Rate and Time Rate System

Piece Rate System

1. Method of wage payment on the basis of output
2. Focuses on large volume of production
3. There is no guarantee of minimum wage to the employees
4. It is less stable system
5. Less supervision needed
6. Poor quality of work

Time Rate System

1. Method of wage payment on the basis of time spent
2. Focuses on quality of product
3. Guarantee of minimum wage
4. It is more stable
5. More supervision needed
6. Better quality of work

All workers are guaranteed at least the minimum hourly wage, but employers set piece rates so that their employees’ average hourly earnings exceed the minimum wage by 10 percent to 30 percent. The prospect of earning higher-than-minimum wages gives workers an incentive to work fast, and supervision of piece rate workers often focuses on the quality of the work done, such as ensuring that there are not too many branches and twigs in bins that workers fill quickly.

Piece rate earnings and minimum wages are linked. If the minimum wage is $20 an hour, a worker must earn at least $160 in eight hours. A worker who picks six bins of apples at $30 a bin in eight hours earns $180 or 12 percent more than the minimum wage, while a worker who picks seven bins earns $210 or 31 percent more than the minimum wage.

Asymmetry. Labor markets have information asymmetries. Employers seeking workers know the requirements of the job, but not the productivity of potential employees. Workers know their abilities, but not the requirements of the job. Most factory jobs pay hourly wages because machines set the pace of work, while many sales jobs offer commissions or piece rate wages to incentivize workers who cannot easily be monitored to work harder. Sales commissions are often set so that average earnings exceed the guaranteed hourly or monthly wage, and some states exempt sales representatives who earn commissions from minimum wage laws.

Agricultural uncertainties arise from weather, market prices, and other factors. Before minimum wages and child labor laws applied to agriculture, many farmers offered piece rate wages to anyone who would work, which allowed farmers to estimate the cost of harvesting a crop regardless of who did the work. Farmer costs would be $20 a bin, but worker earnings varied depending on orchard conditions, yields, and worker abilities.

Lincoln Electric, a maker of arc welders and electric motors, attracts workers who prefer piece rate wages

Lincoln guarantees employment, and enlists worker suggestions to increase productivity that result in higher earnings.

Why do most jobs pay hourly wages? One reason is that many production processes require team efforts, so offering one worker on an assembly line a piece rate wage would not speed up the production process if the other workers could not keep up with a fast employee. Hourly wage systems are easier to administer, especially in states that require employers to pay piece rate workers at their average piece rate earnings for mandatory rest periods.

Some employers pay hourly wages and offer bonuses to one or a team of workers who surpass a target level of output each day or week. Under hourly-plus-bonus wage systems, most worker earnings are from the hourly wage, but workers can earn more if they work fast and surpass the target level of output.

DOL. DOL aims to prevent any adverse effects of H-2A on the wages and working conditions of US workers by requiring employers to pay prevailing piece rates and to abide by prevailing practices such as offering housing to workers and their families if that is common in the area. This raises the question of how to determine PWRs and prevailing practices.

DOL makes grants to State Workforce Agencies to perform three major H-2A program tasks, review employer job offers and post them, inspect the housing to be offered to US and H-2A workers, and conduct prevailing wage and practice surveys. SWAs are under pressure from employers and their agents to quickly review and enter job orders into job banks (https://seasonaljobs.dol.gov) and to inspect the housing employers are providing to H-2A and out-of-area workers, but there appear to be few consequences if SWAs do not conduct prevailing wage and practice surveys.

SWAs are not required to determine PWRs for the crops in their areas. TEGL 14-19, dated April 13, 2020, says that “SWAs can collect and provide information to OFLC on whether a prevailing hourly wage or piece rate exists for the occupation or crop in the area of intended employment” (p12).

Washington. Among the five states that account for over half of all H-2A jobs, only Washington has a significant number of PWRs in DOL’s online wage library, including $28.26 per bin for harvesting apples with an AEWR guaranteed hourly wage in 2022 based on a 2020 employer survey. There are seven major varieties of apples, but harvest PWRs were specified only for Cripps Pink or pink lady, $30 a bin, and Honeycrisp, $31.76 a bin. The PWR for blueberry harvesting was $0.50 a pound, and for harvesting cherries $0.20 to $0.22 a pound.

Until 2016, Washington’s ESD conducted surveys of employers and workers to determine prevailing wages and practices and issued a report that included survey results as well as analysis of employment and earnings data based on employer UI reports. ESD sent surveys to apple, berry, and other tree fruit employers who were registered with the UI system, and weighted employer responses by their peak week employment to determine PWRs for harvesting particular varieties of apples, cherries, and pears.

Using the survey results, ESD determined PWRs for harvesting eight varieties of apples in 2011 and 2013, red and yellow cherries, and two varieties of pears. When PWRs rose in nominal terms, they often rose significantly. Using 2007 as a base, median PWRs for harvesting various varieties of apples decreased or were mostly flat between 2007 and 2009, but rose up to 29 percent above 2007 levels in 2011. PWRs for harvesting all reported varieties of apples rose by double-digit percentages between 2007 and 2013. The pattern of cherry PWRs show that flat piece rates can be followed by significant jumps.

Median PWRs for apples, cherries, and pears, 2007-2013

Before 2015, ESD obtained only piece rate data. Beginning in 2015, ESD asked employers to report both piece rates and the associated hourly guarantee in order to distinguish between piece rates and the state minimum wage guarantee from piece rates and the AEWR guarantee.

ESD made eight PWRs for harvesting various varieties of apples in 2015, ranging from a low of $20 a bin to harvest Braeburn and Red Delicious to a high of $28 a bin to harvest Fuji. ESD estimated that 24 percent of all employers responded to the survey, and that responding employers employed 26 percent of estimated total employment in apples during the survey week.

PWRs for apples, cherries, and pears in 2015

Most employers have several varieties of apples, so the total of almost 1,900 employers exceeds the number of apple establishments in 2015, since employers are counted for each variety. Similarly, the total estimated apple workforce for the eight varieties, 103,000, double counts workers who are employed by two or more employers and who pick several varieties of apples.

In 2018 ESD changed its methodology and enlarged the number of data cells or PWRs by asking employers to report employment and wages (1) by the variety of apples as well as (2) the density of the orchard and (3) the type of pick, color, clip, or strip. Workers strip-picking apples in orchards with high-density trees pick faster than those picking apples by color in low-density orchards. Other factors that also affect worker productivity, including weather, yields, and whether workers climbed ladders or used platforms to raise and lower themselves, were not included in the survey.

Some 1,612 employers were contacted in 2018 and 781 responded, 48 percent, and 1,833 of the 4,273 workers contacted responded, 43 percent. The employer survey data were used to make 71 of the 306 potential PWRs, including 33 PWRs for apples, 26 for cherries, and seven for pear activities.

Some of the 71 PWRs made in 2018

The 2018 PWRs reflected a switch in methodology. Instead of weighting employer responses by their employment during the survey week, a capture-recapture methodology weighted employer responses by several factors, including whether they responded to previous surveys.

Capture-recapture is often used to estimate stocks of wildlife. For example, to estimate the number of fish in a closed lake, an analyst could capture, tag, and release back into the lake 200 fish and assume that the tagged fish mix with the non-tagged fish. The analyst then catches a second sample of say 100 fish, finds that 20 percent are tagged, and assumes that the 200 tagged fish that were released were 20 percent of the total estimate of 1,000 fish in the lake. Catch and release methodologies assume a closed population (no fish in or out of the lake), independent samples, meaning that untagged fish do not learn how to evade capture, and that each catch is a random sample of all fish in the lake.

The strength of catch and release is the promise of detailed data by e.g. apple variety and task and the expectation that repeated samples will improve the accuracy of the employment and wage estimates over time. The weaknesses include the fact that employers enter and leave the industry and the assumption that employers who do respond are similar to all employers.

Sending surveys only to employers who are registered as apple, berry, or other tree fruit growers misses nonfarm businesses that bring workers to farms. For example, Stemilt Ag Services is classified in NAICS 1151, crop support services, and thus would not receive a survey form.

ESD used raking algorithms and other techniques to transform sample data into employment totals to determine whether the employment of responding employers was at least 15 percent of the estimated total employment in the crop variety and activity. Apples are a perennial crop whose acreage changes slowly, but the switch from weighting sample employer responses by their employment with the 2015 data to using capture-recapture techniques on the 2018 data yielded very different total employment estimates for 2015 and 2018. The estimated total employment in Fuji or Gala fell sharply, while estimated employment in Golden Delicious rose sharply.

Double-counting makes it hard to cross-check ESD estimates. Suppose an employer had seven varieties of apples and assigned a crew of 50 workers to pick one variety each day during the busiest week. In this case, 50 unique workers would account for 350 estimated total employment in all seven varieties, even though only 50 workers were employed on any one day and 50 unique workers were employed during the week. In short, if more workers pick multiple varieties during the survey week, estimated total employment will be higher and raise the need for more survey responses to reach the 15 percent threshold.

ESD reported that, of 737 worker respondents, 43 percent picked one variety of apples for one employer, 38 percent picked one variety for multiple employers, and 19 percent picked multiple varieties for multiple employers.

2020 Survey. The 2020 employer survey asked employers to report the piece rate per bin and the hourly guaranteed wage if they paid a piece rate. The survey form asks employers to report presumably their total acreage of each variety, the wage paid to non-H-2A workers during the busiest week of the season, and the number of workers employed during this busiest week.

Employers report acres, wages, and employment by apple variety, but hourly guarantees only for piece rate jobs

Responses to this survey allowed ESD to make 19 of the 81 potential PWRs, including seven for apples, five for berries, and six for cherries based on a 44 percent employer response rate. ESD found that employers did not require experience, set minimum productivity standards, or offer family housing.

The UI system provides data on establishments (employers), employment, and earnings for entities classified in apple, berry, or other tree fruit NAICS codes, but does not generate employer, employment and wage data by variety of apples, berries, or cherries or the task performed in these crops. No one knows the number of employers or employment by variety and activity.

Based on survey responses in 2018, 2019, and 2020, ESD estimated with 95 percent confidence that WA had 1,052 apple employers, 965 cherry growers, and 641 pear growers. The standard errors for particular varieties were very high, that is, the 1,009 Gala employers could be between 736 and 1,507 Gala employers with 95 percent confidence.

WA reported 691 apple establishments (NAICS 111331) registered with UI in 2020, apple employment averaged 20,500, and weekly wages averaged $590. There were 839 other noncitrus fruit farming establishments (NAICS 111339), including cherry and pear growers, that employed an average 9,100 workers at an average $515 a week.

The same establishment can grow several varieties of apples, and can grow apples, cherries and pears and thus be counted multiple times. The 1,052 apple growers could include some establishments classified as cherry or pear growers who also have apples, just as cherry or pear growers could also grow apples.

ESD estimated 1,052 apple, 965 cherry, and 641 pear employers in 2020

In order to determine a PWR, ESD had to receive responses from employers of at least 15 percent of estimated total employment in a variety and activity such as harvesting. Based on these criteria, and an additional requirement that the survey responses for a particular variety and activity include at least one small, medium, and large employer response. ESD made three apple harvest PWRs, for all apples, Cripps pink, and Honeycrisp.

ESD obtained enough survey responses to make 3 PWRs for apple harvesting in 2020

The 3 piece rate PWRs were $28.26 a bin for all apples, $30 a bin for Cripps pink, and $31.76 for Honeycrisp

ESD surveyed workers who applied for UI benefits by telephone, and received almost 1,300 responses. Most workers reported being paid piece rates to pick apples except for those picking Honeycrisp, where about half reported hourly wages. Workers generally reported piece rate and hourly wages similar to those reported by employers.

Perspective. WA’s ESD is the only SWA in a major H-2A-using state that conducts statewide surveys of employers and workers to determine PWRs for major commodities. The switch in methodology in 2018 prompted litigation, first from employers who complained when the blueberry piece rate rose from $0.50 to $0.75 a pound in 2018, and then from workers when the survey allowed employers to report a piece rate or a guaranteed hourly wage. The 2020 survey clarified that only employers who pay piece rates should also report guaranteed hourly wages.

The strength of the capture-recapture methodology is the promise of sufficient data to make more PWRs. However, employer responses have been insufficient to make as many PWRs as were made with the old methodology. The PWRs made using capture-recapture for 2020, including $30 for harvesting Cripps Pink and $0.21 a pound for harvesting cherries, are 20 and 16 percent higher in 2020 than in 2013. WA’s AEWR rose from $12 in 2013 to $15.83 in 2020, up 32 percent.

If ESD cannot make a PWR determination for a particular variety, should it use the PWR for all apples as a PWR? Between 2007 and 2015, the highest PWR for harvesting Fuji apples was at least 40 percent higher than the lowest PWR for harvesting Red Delicious apples. Having one PWR for all apples means a high piece rate for Red Delicious and a lower piece rate for Fuji and other varieties.

The purpose of PWRs is to prevent wage depression, so SWAs survey employers to obtain data on non-H-2A workers. As the H-2A program expands, more farms producing US apples, berries, and oranges are likely to use at least some H-2A workers, and most apples, berries, and oranges may be from farms that have some H-2A workers (H-2A using farms tend to be larger; most farms probably do not use H-2A workers).

A major question is how the requirement to pay the AEWR on these farms affects piece rates over time. If the AEWR exceeds the minimum wage by 10 percent or more, do growers raise piece rates so that workers still have an incentive to work fast and earn more than the AEWR, or does the availability of H-2A workers who are earning 10 times more than they would earn in their home countries allow piece rates to stagnate?

References

ESD. 2013 Agricultural Workforce.

ESD. 2015 Agricultural Workforce.

ESD. 2018 Agricultural peak employment wage and practices survey results.

ESD. 2020 Agricultural Peak Employment Wage and Practices Employer & Worker Survey Results

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