Labor Costs Rising, Forcing Robotic Hand
Jeff Klein, Managing Partner of the Jack Klein Partnership, was paying eight employees to stack 50-pound boxes of his Delta King and Delta Queen branded potatoes. The operation grows and packs other crops as well but for two and a half months, pallets of potatoes are rolling out of the facility and on to trucks. Klein said the rising cost of production, driven by increasing labor costs, forced him to look at alternatives for minimum-wage employees stacking boxes. “I’ve spent a few million dollars in the last year or so just buying automation equipment to get rid of people,” Klein said, “Because I have no choice.”
Now, a Kuka VolmStacker robotic palletizer sits in the middle of the packing shed and has replaced all eight of those positions. Klein said he spent about $50,000 on the machine itself and $200,000 on infrastructure to feed it, but it’s not going to take long to see that money come back around. “I only pack potatoes for two and a half months out of the year. Even at that, I figure I’ll have the machine paid off in four years and then all of that money comes back to the bottom line,” Klein said. “I can’t pay the California minimum wage for someone stacking boxes.”
Labor Costs Hurting Workers?
California’s minimum wage is $11.00 an hour if you have over 26 employees. The federal minimum wage for the U.S. is $7.25 and other potato producing states, like Minnesota, are over a dollar less than California’s minimum. Klein said it’s hard to stay competitive with those higher labor costs. “Our wage is going up to $15.00 an hour and right now we are paying $12.00 an hour just to find anyone,” Klein said. “The cost for production has just gone through the roof.”
Some could argue the rising labor costs and the access to cheap money through loans has actually hurt the agricultural worker. Klein is a fourth-generation farmer and knows all of his employees personally. He said they deserve every bit of $15.00 an hour, but that doesn’t mean it’s sustainable. “The only thing a $15.00 an hour wage has done is made everything in automation that more affordable,” Klein said. “I’ve bought leaf-pullers for my grapes, I’ve bought pre-pruners, I am looking at an automatic potato sorter next week to reduce 30 workers down to 10…because if I don’t, I won’t be in the agriculture business anymore.”