OT: On the killing floor; immigrations impacts on wages

[no_such_reality]

A very good article in the WSJ today on a beef plant that was raided for illegal immigration in the mid-2000s and the challenges and changes they’re doing to try and hire a workforce.

On the Killing Floor, Clues to the Impact of Immigration on Jobs

They’re paying $11.75/hr to start and top out at $13.95. They’ve done massive outreach to hire. They’ve done tours of local towns, outreach, signing bonuses, referral bonuses and targeting refugee groups in the Denver area.

They have a 29% annual turnover. It cost $12,000 to $15,000 to train a new hire they claim. They’ve incurred the expenses of the massive advertising and hiring campaign and compliance campaign they talk about.

Yet they obstinately refuse to increase wages to attract and keep workers.

Stunning, IMHO.

[bearishgurl]

I just got back with staying with a friend in Eaton, CO, a grain-producing town (one of my many stops in that state) about 15 miles northwest of the ever-present Monfort Meat Packing Co (nka “Swift”). In the past, I have had several relatives who lived within a five-mile radius of Monfort (“Kersey” area) and I could still smell the feedlots while standing on their lots and in their houses with the windows open. The locals are used to it because the plant is a “fixture” in the area.

Monfort’s cattle is/was literally stacked on top of one-another in their dozens of feedlots.

Immigration (mostly Mexican and central American) was ALWAYS available locally to staff Monfort and to farm onions and sugar beets.

The plant was raided in 2006 and lost about 1300 workers due to not having I-9’s filed or not having the proper documents as represented on their I-9’s which were filed with the employer fraudulently. Most of the workers without proper documentation were deported at the time. The plant literally had to start from scratch hiring quickly again.

In the past 35 years or so, I have made over 60 road trips from San Diego to this immediate area. Longtime Weld and Morgan County residents have always complained vociferously about local immigrants (not necessarily race-specific) using their schools and social services but I have YET to see ANY American citizen who lives there, young or old, state that they wanted to work in any of these agricultural jobs.

http://www.smfws.com/articles2006/2006octobernovemberdecember/art12242006.htm

In fact, as of 2012, both Weld and neighboring Morgan County’s population was comprised of more than 28% and 34%, respectively, “Hispanic or Latino” individuals, much the same as most California counties.

http://quickfacts.census.gov/qfd/states/08/08123.html

http://quickfacts.census.gov/qfd/states/08/08087.html

In fact, 21% of the population of the entire state of CO claims to be of “Hispanic or Latino” origin.

http://quickfacts.census.gov/qfd/states/08000.html

The work at Monfort is very hard, dirty and grueling and workers run equipment which can easily maim or kill them if they are not very careful. They supply a very large amount of restaurant chains across the US (ex: Black Angus).

In spite of all this, what they pay is a very good wage to their employees whose families are using indigent healthcare and other state services.

I don’t see American citizens of any race ever wanting these jobs, nor taking them. Most High school graduates who grow up around the area of Monfort go onto college and many leave the area after college graduation to take employment elsewhere. There are a handful of GREAT universities in and within 35 miles of Greeley, CO.

[no_such_reality]

At what wage would American workers start to take those jobs?

How much of that 29% turnover is due to the job paying $12 and having 3X the risk of injury of San Diego police officer?

How much does recruiting 29% of your work force a year cost?

How much does that turnover affect the injury rate?

how much does that injury drive their worker’s comp and insurance through the roof?

Americans don’t want those jobs because they know they don’t pay well and they are brutally hard. CO minimum wage is $7.78/hr. The slaughter house is an assembly line and the human cogs in it are driven as fast as they can.

When I read the efforts the business is going through is like reading about a person driving an 15 minutes out of their way to save 2 cents a gallon on gas in car with a ten gallon tank.

[bearishgurl]

[quote=no_such_reality]At what wage would American workers start to take those jobs?

How much of that 29% turnover is due to the job paying $12 and having 3X the risk of injury of San Diego police officer?

How much does recruiting 29% of your work force a year cost?

How much does that turnover affect the injury rate?

how much does that injury drive their worker’s comp and insurance through the roof?

Americans don’t want those jobs because they know they don’t pay well and they are brutally hard. CO minimum wage is $7.78/hr. The slaughter house is an assembly line and the human cogs in it are driven as fast as they can.

When I read the efforts the business is going through is like reading about a person driving an 15 minutes out of their way to save 2 cents a gallon on gas in car with a ten gallon tank.[/quote]

I understand everything you’re saying here, NSR. I’m not even sure Americans would take these jobs if they paid $15 or $18 hr. These employees can rent old farmhouses cheaply and easily get 12 people in there for <<$400 mo. Americans don't want those either because they are all situated out on Weld County Roads (WCR-#), most of them dirt or gravel and within smelling distance of the plant. With 1-3 workers per hsld and their assorted other relatives and children living with them and getting EBT, Medicaid and indigent health coverage, and other social services, these families are making out okay. Really .... they ARE! My friend in Eaton works for a social service agency in Greeley that serves a good portion of this population. They even have "free" dental care available at their clinic. I personally toured the clinic and was amazed at the (very expensive and state-of-the-art) medical and dental equipment they had - all paid for by well-heeled longtime locals' donations. The Weld and Morgan County school districts have been serving this particular population for more than 50 years. The wheel has been invented. It's all good ... I guess :=]

[SK in CV]

[quote=bearishgurl]
I understand everything you’re saying here, NSR. I’m not even sure Americans would take these jobs if they paid $15 or $18 hr. These employees can rent old farmhouses cheaply and easily get 12 people in there for <<$400 mo. Americans don't want those either because they are all situated out on Weld County Roads (WCR-#), most of them dirt or gravel and within smelling distance of the plant. With 1-3 workers per hsld and their assorted other relatives and children living with them and getting EBT, Medicaid and indigent health coverage, and other social services, these families are making out okay. Really .... they ARE! My friend in Eaton works for a social service agency in Greeley that serves a good portion of this population. They even have "free" dental care available at their clinic. I personally toured the clinic and was amazed at the (very expensive and state-of-the-art) medical and dental equipment they had - all paid for by well-heeled longtime locals' donations. The Weld and Morgan County school districts have been serving this particular population for more than 50 years. The wheel has been invented. It's all good ... I guess :=][/quote] BG, do you think maybe the possibility exists that living in an old farmhouse with 11 other people isn't their first choice in how to live? Maybe, if their employer paid them 25% more, there would be much less turnover, they'd save recruiting and training costs, and their employees wouldn't have to live 12 people to a house. They might even have enough income so that don't need SNAP or Medicaid. And the employer would probably decrease their costs. The short-sightedness of some business operators is truly mind-numbing.

[no_such_reality]

[quote=SK in CV] Maybe, if their employer paid them 25% more, there would be much less turnover, they’d save recruiting and training costs, and their employees wouldn’t have to live 12 people to a house. They might even have enough income so that don’t need SNAP or Medicaid. And the employer would probably decrease their costs.

The short-sightedness of some business operators is truly mind-numbing.[/quote]

Yes, that’s my point. Are they that short sighted? That incompetent? Oblivious, like the person driving around ten minutes trying to save a couple cents a gallon on gas? Or are they that cynical and jaded and they’ve actually run the numbers?

I really don’t think they’ve run the numbers. Other than the most basic, if we increase wages $1/hr across 3000 employees, that’s $6 million a year.

Not stopping to think they’re spending $10+ million on new hire training a year. They’re spending how much on hiring bonuses? They’re spending how many millions on compliance? etc.

They lost a 1/3rd of their staff on the raid. New management’s response was a massive media campaign, newspaper campaign, billboard compaign, pound the pavement town visit campaign, refugee hiring campaign, hiring bonuses, rework the operations to support multiple languages to replace ~600 workers and then expand another 1000.

All that instead of saying “hey, let’s try $2/hr more, it’s only $6 million and maybe it’ll slow down our $12 million new hire training expenses due to attrition and cut down on our 6% injury rate”.

[SK in CV]

[quote=no_such_reality]
Yes, that’s my point. Are they that short sighted? That incompetent? Oblivious, like the person driving around ten minutes trying to save a couple cents a gallon on gas? Or are they that cynical and jaded and they’ve actually run the numbers?

I really don’t think they’ve run the numbers. Other than the most basic, if we increase wages $1/hr across 3000 employees, that’s $6 million a year.

Not stopping to think they’re spending $10+ million on new hire training a year. They’re spending how much on hiring bonuses? They’re spending how many millions on compliance? etc.

They lost a 1/3rd of their staff on the raid. New management’s response was a massive media campaign, newspaper campaign, billboard compaign, pound the pavement town visit campaign, refugee hiring campaign, hiring bonuses, rework the operations to support multiple languages to replace ~600 workers and then expand another 1000.

All that instead of saying “hey, let’s try $2/hr more, it’s only $6 million and maybe it’ll slow down our $12 million new hire training expenses due to attrition”.[/quote]

Yes, I think they are that short-sighted. Compare the business models of Costco and Walmart.

Costco (and Price Club before them) employees are well paid, well above the average for retail. They offer benefits that even some much higher end employers don’t offer, and their employees love working for them and stick around a long time. They’re loyal. As are their customers, because we know we will almost always be treated well when we walk into one of their stores.

Compare that to Walmart, where employees are paid at the bottom of the retail scale, are horribly unhappy as a whole, they have high turnover, they cut hours leaving their shelves unstocked. And who would be the biggest beneficiary of jacking up the minimum wage across the country? Walmart. And who vociferously objects to raising the minimum wage? That would be the biggest welfare recipient in the country, Walmart.

I read somewhere over the last couple days that 10 cents of every retail dollar spent in this country is spent at Walmart. That number seems really high to me, but if it’s true, it can only mean that an extra $2 or $3 an hour in low paid workers pockets will end up as Walmart revenue, because it’s not the people making $100K a year spending all their money at Walmart.

Have they run the numbers? I’m sure they have. But it doesn’t fit into their budgets. The recruiting costs are off-budget. The lost revenue from empty shelves is off-budget. Employee turnover is off-budget. But direct employee costs are on budget, and management can be held accountable when that goes up. So they ignore the effects to the bottom line, and maintain a staff that qualifies for public assistance, living at poverty levels. And tell them to take a 2nd job to make ends meet.

They really are that short-sighted.

[bearishgurl]

[quote=SK in CV][quote=bearishgurl]
I understand everything you’re saying here, NSR. I’m not even sure Americans would take these jobs if they paid $15 or $18 hr. These employees can rent old farmhouses cheaply and easily get 12 people in there for <<$400 mo. Americans don't want those either because they are all situated out on Weld County Roads (WCR-#), most of them dirt or gravel and within smelling distance of the plant. With 1-3 workers per hsld and their assorted other relatives and children living with them and getting EBT, Medicaid and indigent health coverage, and other social services, these families are making out okay. Really .... they ARE! My friend in Eaton works for a social service agency in Greeley that serves a good portion of this population. They even have "free" dental care available at their clinic. I personally toured the clinic and was amazed at the (very expensive and state-of-the-art) medical and dental equipment they had - all paid for by well-heeled longtime locals' donations. The Weld and Morgan County school districts have been serving this particular population for more than 50 years. The wheel has been invented. It's all good ... I guess :=][/quote] BG, do you think maybe the possibility exists that living in an old farmhouse with 11 other people isn't their first choice in how to live? Maybe, if their employer paid them 25% more, there would be much less turnover, they'd save recruiting and training costs, and their employees wouldn't have to live 12 people to a house. They might even have enough income so that don't need SNAP or Medicaid. And the employer would probably decrease their costs. The short-sightedness of some business operators is truly mind-numbing.[/quote] SK, it probably isn't their first choice, but these (rural) farmhouses, for the most part, are 75+ yo 1500-2500 sf homes which have long dirt driveways and may or may not have a detached garage. Due to the roads they sit on, they can be very dusty inside. Many of these workers also live in Greeley (abt 7.5 mi west of the plant). Greeley has many 90+ yr old largish houses in wildly varying states of condition on its east side which have full (finished) basements. I'm sure the rent is higher there (than Kersey) but these renters would live in close proximity to more public services, including public transportation. I think these (agricultural employers') mindset is just a permanent cramdown in wages because they can get away with it with this particular population! A dollar or two an hour here and there leads to future raises based upon percentages and also higher payroll taxes. The exact same thing has been happening over the years with Tyson (pork processing plants) in the states of AR and IA. http://www.hrw.org/reports/2005/usa0105/7.htm

http://refugeeresettlementwatch.wordpress.com/2008/01/25/heres-a-shocker-for-you-tysons-meat-packing-plant-in-emporia-to-close/

http://en.wikipedia.org/wiki/Postville_Raid

http://www.theworld.org/2011/12/storm-lake-iowa-a-meatpacking-town-fueled-by-immigrant-labor/

…Workforce

In 2007, the U.S. Department of Labor reported 146,400 workers employed in the meat packing industry, of which 128,100 were production workers. In the food industry as a whole, meat packing and processing is the largest employer.

As a result of the need to keep expenses low, the meat packing industry has been a longtime opponent of workers’ unions and paid well below the national average. Employing recent immigrants has become standard practice. According to David Bacon in The American Prospect, “Today, Spanish is the language on the floor of almost every plant. Most workers come from Mexico, with smaller numbers from Central America. Refugees from Bosnia, Vietnam, and even the Sudan are a growing presence in some areas, but the vast majority of meatpacking workers are Latinos.” During the late 1990s and early 2000s, the meat packing industry received negative publicity for its employment of illegal aliens, as well as its dangerous and low-paying working conditions.

Meat packing also is a highly labor-intensive industry, and a large majority of the total employees (84 percent) were production workers, compared to 72 percent in all food preparation sectors and 67 percent in all manufacturing industries. Because of the industry’s low wages and demanding working conditions, employee turnover remains high…

http://business.highbeam.com/industry-reports/food/meat-packing-plants

And the 1300 undocumented workers found in the 2006 INS raid in the OP were actually based in six states:

In 2002, Swift & Company was purchased by Hicks Muse Tate & Furst, a leading, Dallas-based private equity firm, and Booth Creek Management.

In December 2006, six of the company’s meat-packing facilities in Colorado, Nebraska, Texas, Utah, Iowa, and Minnesota were raided by U.S. Immigration and Customs Enforcement officials, resulting in the apprehension of 1,282 illegal aliens from Mexico, Guatemala, Honduras, El Salvador, Peru, Laos, Sudan, and Ethiopia, and nearly 200 of them criminally charged after a ten month investigation into identity theft…

http://en.wikipedia.org/wiki/JBS_USA

FYI, in 1993, the INS “set up shop” along with the DEA and NTF in a group of nondescript permanently-skirted trailers just west of Brush, CO (Morgan Co). At that time, this (I-76) corridor was discovered to be a BIG illegal drug-trafficking artery.

SK, if you are a meat-eater, would you be willing to pay $35-$40 (as opposed to $20-$28) for your steak dinner out in order to subsidize better wages for US meat processing/packing-industry employees?

[SK in CV]

[quote=bearishgurl]
SK, if you are a meat-eater, would you be willing to pay $35-$40 (as opposed to $20-$28) for your steak dinner out in order to subsidize better wages for US meat processing/packing-industry employees?[/quote]

If it lowered their total costs, why would prices rise by 40 to 75%? Beyond that, there is no chance that raising wages by even $5 an hour should raise retail prices that much, even if all other costs remained the same. Low level meet handlers process hundreds of lbs of meat per hour.

And I don’t think I’ve had a $28 steak dinner in a restaurant in my life. Probably been a decade since I’ve had a steak dinner at any price in a restaurant. I make it a lot better at home for a lot cheaper.

[The-Shoveler]

I remember reading some guy ran the numbers and a big mac meal would need to go up about a dollar to make up the cost if the wages went from current about $8.00 to $15 an hour.

http://www.forbes.com/sites/clareoconnor/2013/07/30/how-much-would-a-big-mac-cost-if-mcdonalds-workers-were-paid-15-per-hour/

I think I could live with that.

[dumbrenter]

[quote=SK in CV]
BG, do you think maybe the possibility exists that living in an old farmhouse with 11 other people isn’t their first choice in how to live? Maybe, if their employer paid them 25% more, there would be much less turnover, they’d save recruiting and training costs, and their employees wouldn’t have to live 12 people to a house..[/quote]

Hard to say if that is their first choice, but we know for sure that living with 11 other people in CO farmhouse definitely ranks above the standard of living where they came from.
Nobody force marched them to CO.
It is a set of rational people making rational choices, they are dealt a bad hand in life and by their place of birth and they are making the best of the set of choices available to them.

Maybe if their employer paid 25% more, they’d buy more Tequila or bling or send some via western union back home. What makes you think they will move out to say 8/farmhouse just because the wages went up?

[SD Realtor]

Ummm Shoveler as Forbes points out, actually, is that the price of the meal may not move at all.

McDonalds would simply find out a way to keep the overall labor costs the same. They would pay the workers 15 bucks an hour and then reduce the workforce by the same amount through automation.

[SK in CV]

[quote=dumbrenter]Maybe if their employer paid 25% more, they’d buy more Tequila or bling or send some via western union back home. What makes you think they will move out to say 8/farmhouse just because the wages went up?[/quote]

Because I think they’re probably just like you and me. If they’re married with children, they want a home with their spouse and kids, not a farmhouse with 8 other people they didn’t know from adam’s cat when they moved in. If they’re single and over 25, they probably don’t want to live with more than a single roommate or two. If they’re immigrants, I doubt they moved here to live in similar conditions as where they came from, but better. Would you buy bling and tequila with your 25% raise? That would never be on my radar. Why would you even consider that an option for these workers?

[The-Shoveler]

[quote=SD Realtor]Ummm Shoveler as Forbes points out, actually, is that the price of the meal may not move at all.

McDonalds would simply find out a way to keep the overall labor costs the same. They would pay the workers 15 bucks an hour and then reduce the workforce by the same amount through automation.[/quote]

They are going reduce the workforce by automation regardless.

It’s going to become cheaper and cheaper to use more and more sophisticated automation very quickly.

[SD Realtor]

I believe the point of the article is that McDonalds or any other corporate entity will strive to keep labor costs a constant regardless of the wage scale in one way or another.

It is quite likely that a place like McDonalds could have already automated easily but chose not to because the cost may not make sense. Give them a nudge and they might.

It is all about net profit. McDonalds is an example that looses the wage scale battle. As NSR pointed out in his argument about the place in Colorado, paying those employees more makes sense because it saves the company money in the long run due to retention and employee training costs. Thus the company becomes more profitable by doing so. This is a valid argument and makes alot of sense.

If McDonalds can improve the bottom line by paying a guy 15 bucks to flip a burger then it will.

Employees are not entitled to anything. They don’t like the pay, they can quit and look for another job.

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