Trump’s rhetoric puts American dairy at risk

America’s dairy industry, and also American fruit and vegetable production, will be seriously hit if incoming President Trump aligns his actions with pre-election rhetoric. These industries rely on officially undocumented Hispanic labour, from Mexico and further south, to do much of the hard work.

Mr Trump has said he is going to send 11 million undocumented immigrants back over the border. However, cool heads from these industries will be trying in the next few weeks to get in Mr Trump’s ear to alert him to some of the economic implications.  Quite simply, many of the big farms with more than 1000 cows, which now supply more than half of America’s milk, will be in turmoil without these workers.

Everybody associated with the industry knows that this is the situation. However, it has been in the interests of everyone – the workers, the farmers and the Government – to keep quiet.

The workers get paid award wages, or sometimes a little more – typically $8 to $10 per hour – which does not sound much and indeed is not very much. However, these workers typically work for 60 or so hours per week and thereby make a living which is much better than they could achieve back in their home countries.

For the farmers, the system also works very well. They get reliable staff who do the job of milking cows. On these big farms, this milking typically goes on for 18 to 22 hours per day, in either two or three shifts, and with up to 5000 cows or even more going through the one milking shed, with each cow milked two or three times per day.

If asked, the farmers will state with a straight face, that all of their workers are documented and carry social security cards. This statement is correct, but what is not stated is that on many farms a high proportion of these cards are fake.

The Government knows that many of the cards are fake, but has an interest in maintaining the situation. This is not only because it keeps the industries viable, but because these workers with fake documentation are still paying social security taxes. It is a nice revenue source, given that the workers can never make claims for social security benefits using their fake cards.

If the Government had wanted to stop the rorting of the system, it could have done so very easily a long time ago. All it had to do was make the system electronic. However, agriculture has had an exemption from that requirement, with the recording undertaken manually.

Typically, it takes the American Government about six months to identify fake social security cards. At that point the farmer is notified. The farmer then calls in the worker and says his card is fake and that he can no longer be employed.

The worker then looks at the card, apologises profusely for accidentally using the number of his brother or nephew who has a very similar name, and promises to being in the correct card the next day.  And the next day he turns up with another fake card.

Within the fruit and vegetable industries, a somewhat different system seems to apply, where some casual workers are paid cash. That should mean the farm business cannot claim these wages as tax deductible.  But even that can be managed through employment of contractors, who supply the labour, and who then simply disappear from the system, to re-appear with a new business name.

Here in New Zealand, it seems amazing that such systems could survive. We have to remember that it has survived because it has been in everyone’s interest for it to survive.

During the pre-election phase, it was very much in the interests of Mr Trump to say he would send 11 million people back south over the border. My guess is that there will indeed be some token deportations, but that will be where it stops. However, only time will tell as to whether rhetoric and action do truly align.

For New Zealand dairy farmers, this simply means more uncertainty. It could mean higher global prices for dairy, but it may or may not happen.

These days nothing is certain, except for death and taxes, and even taxes would seem to be voluntary for some American groups. Whatever happens, it is surely going to be an interesting journey.

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About Keith Woodford

Keith Woodford is an independent consultant, based in New Zealand, who works internationally on agri-food systems and rural development projects. He holds honorary positions as Professor of Agri-Food Systems at Lincoln University, New Zealand, and as Senior Research Fellow at the Contemporary China Research Centre at Victoria University, Wellington.
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2 Responses to Trump’s rhetoric puts American dairy at risk

  1. Honora Renwick says:

    Best comment post-election I’ve read. Thanks.

  2. John W Hill says:

    Keith, I don’t think you need worry as I think that would close to the bottom of the list. I’m a New Zealander living on Canada’s east coast. I’m a contractor servicing on multi-axis machine tools and most of my work is in the US, I will be flying out tonight again, only been home for a week. Every customer I work with complains about tax and I have to agree with them that they can’t compete globally with the taxes they have now. I would say that will be high on the list. He still has to put his cabinet together which is of interest to me, especially treasury secretary.

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