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Minimum Wage Increase ... How are Dairy Farms Affected?

Posted: November 20, 2007

Significant changes have come to minimum wage laws. To understand how farmers are affected we must begin with laws that affect all employers.

Significant changes have come to minimum wage laws. To understand how farmers are affected we must begin with laws that affect all employers. In Pennsylvania, employing more or less than 10 full time employees (or any combination of full- or part-time employees that is equivalent to 10 full time) is a significant breakpoint. Since July 1, 2007 Pennsylvania minimum wage has been $7.15 per hour for those above this breakpoint while those at or below it are subject to minimum wage rules that are lower than the standard state minimum wage. For example the schedule of minimum wage amounts for smaller employers is as follows:

Minimum wage of $6.65 per hour effective July 1, 2007.

Minimum wage of $7.15 per hour (the regular Pennsylvania minimum wage) effective July 1, 2008.

Minimum wage of $7.25 per hour (the Federal mandated minimum wage) effective July 24, 2009.

Calculating your number of employees

The equivalent of 10 or less full-time employees is calculated on a 40-hour workweek. A workweek is a period of seven consecutive days starting on any day selected by the employer. For example, four part-time employees who each worked 20 hours for a total of 80 hours in a workweek (4 x 20 hours) would be the equivalent of two full-time employees. Where the total employee complement hours worked in any workweek exceeds 400 hours, the employer is not eligible for the modified minimum wage implementation schedule. For example, five full-time employees and eight part-time employees (who worked 30 hours each during a workweek) would not qualify for this small business minimum wage. (5 x 40 hours + 8 x 30 hours = 440 hours).

The definition of employees includes all employees, managers, supervisors, officers, and similar individuals employed by an employer. The owner is not considered an employee.

In calculating whether a business is a “small business,” an employer is not limited to one business location. In other words, an employer owning several business locations must calculate the number of hours of all the employees working for the employer at all locations.

Minimum wage law specific to farm employers

Under Pennsylvania's Seasonal Farm Labor Act, seasonal farm workers are required to be paid at least the state minimum wage.

Farm employers, however, are exempt from Pennsylvania's minimum wage law so this discussion means nothing to farm employers, right? Not so fast. Under Pennsylvania's Seasonal Farm Labor Act, seasonal farm workers are required to be paid at least the state minimum wage. Also, while it is true that many farm employers are exempt from minimum wage laws, others become subject to minimum wage because of the number of people they employ.

The federal minimum wage is currently $5.85 per hour. On July 24th, 2008 it will rise to $6.55, and on July 24th, 2009 it will rise to $7.25. But here is where it gets tricky, any farmer who hired people for more than “500 man-days” in any calendar quarter of the prior calendar year is subject to the federal minimum wage. A “man-day” is any day in which an individual worked for at least one hour. Therefore, 500 man-days can be reached with eight full-time employees working 5 days a week for each of 13 weeks in a calendar quarter. Seven workers working six days a week for 13 weeks will also reach the limit. A farmer who hires some additional seasonal help can reach the 500 man-day level very quickly if a large number of people work for only a few weeks in the quarter. For example, only ten employees working for 50 days in a calendar quarter to meet the 500 man-day limit.

If a farm employer is subject to minimum wage law because of the “500 man-day” rule, then he or she must pay the higher of the federal or state minimum wage. In Pennsylvania those rates are the ones cited in the first paragraph of this article. When the federal minimum wage exceeds the state minimum wage, Pennsylvania's minimum wage will be the federal minimum wage. The federal minimum wage is scheduled to increase to $7.25 per hour on July 24th, 2009 and the state minimum wage will increase with it at that time.

Finally, the minimum wage is meant to ensure that people on the lowest end of the wage scale can make enough money to survive. Employers operating profitable businesses, and competing for high-quality employees, should not be paying regular, full-time employees minimum wage. The labor market is competitive and good employees have their pick of jobs. If you want good employees, make sure that you are paying wages that are competitive in your market, and competitive wages will almost certainly be higher than the minimum.

Richard Stup, Penn State Dairy Alliance, and John Becker, Penn State Ag Economics and Rural Sociology