The nation’s pork industry has experienced turbulent change over the past decade. Smaller operations that rely almost exclusively on family labor have largely been replaced by larger operations that hire skilled labor to take advantage of new technologies. The result is a market that provides new jobs for skilled workers in rural communities, while often leaving unskilled workers behind.
Understanding wages and wage growth in this emerging labor market is useful for producers, their employees, and rural communities. Producers can use wage information to determine whether they pay enough to attract and retain skilled employees, and whether their wages are too high to remain competitive. Current and prospective employees can determine whether their wages are fair, or whether it is better to seek employment elsewhere. And rural communities can determine whether hog-production facilities will help the local economy; for example, if wages in the pork industry are low and growth poor, communities may be better off looking to other industries for economic growth.
Why do some people working in the same jobs earn higher wages than do others? The answer depends on many factors, but four in particular seem to account for many of the observed wage differences.
First, the more people know, the more they earn. What people know is often referred to as a person’s “human capital”—and good indicators of what he or she knows are the numbers of years spent 1) in formal education, 2) in the world of work, and 3) at the same job with a specific employer. And just as a farmer can invest in a new tractor (that is, in physical capital), an individual can invest in learning (that is, in the formation of human capital). Both types of investment are costly, but both are worthwhile if the investment leads to greater profits for the individual or business.
Second, men earn more than women. There are several explanations for this phenomenon—including gender discrimination, a woman’s weaker attachment to work outside the home, and work absences due to child bearing and rearing. None of these explanations, however, provides a complete or persuasive answer about why women usually earn less than men.
Third, larger businesses (measured by numbers of employees or by level of production) pay more than smaller ones. Again, there are many explanations for this phenomenon; for example, larger businesses may pay more because they can afford to, or to encourage employees to work harder and with less supervision. While these explanations are plausible, they provide only partial answers about why larger businesses pay more.
Finally, location matters. Location can be described geographically using states and regions, or by parameters such as population density. As a general rule, someone who works in a large city earns more than someone with the same job in a rural community. The higher earnings of city dwellers are often attributed to the higher living costs and the decreased quality of life in cities compared to rural areas.
Taking the four wage determinants listed above as a starting point, we (in conjunction with colleagues at Iowa State University) conducted three nationwide surveys of workers in the pork industry to learn more about wages and wage growth in the 1990s. In particular, we were interested in exploring how the pork industry and its demand for labor are changing, and how the pork industry in Minnesota compares with other pork-producing regions in the nation. We surveyed pork-industry workers in 1990, 1995, and 2000 using funds provided by the National Pork Producers Council (NPPC) and National Hog Farmer (NHF).
Three interesting results emerged from our NPPC-NHF surveys. First, the determinants of wages in the pork industry appear to be the same as in other industries. Second, average national pork-industry wages in 1990 were well below other industries, and the wages in Minnesota were even below the national average. And third, strong wage growth in the pork industry between 1990 and 2000 resulted in more equitable wages when compared to other industries (and these higher wages were enjoyed by all workers in the pork industry). This strong wage growth was triggered by two factors: the increased educational attainment of workers in the industry, and continued growth in the size of pork-producing operations.
Using the NPPC-NHF survey data, we found five (previously identified) factors that do, indeed, influence how much an individual worker in the pork industry is paid. These factors are 1) amount of education, 2) years of job-related experience and job tenure, 3) gender, 4) size of operation where he or she works, and 5) region of employment. In table 2 we show how each of these factors influences an individual’s wages by displaying the percentage a particular factor increases or decreases a worker’s wages in comparison to others in the industry. For example, having a four-year college degree (as opposed to only a high-school diploma) results in a wage premium of roughly 24 percent. Coincidentally, being female also results in a wage decrement of roughly 24 percent.
| Parameters | Average Wage Difference (Percent) | |
|---|---|---|
| Education | ||
| High-school diploma vs. high-school dropout | 11.4 | |
| Two-year college degree vs. high-school graduate | 11.4 | |
| Four-year college degree vs. two-year college degree | 12.8 | |
| Four-year college degree vs. high-school graduate | 24.2 | |
| Years of Experience and Tenure | ||
| One more year of experience vs. average experience | 0.7 | |
| One more year of tenure vs. average tenure | 0.2 | |
| Gender | ||
| Women vs. men | -23.8 | |
| Operation Size | ||
| One more full-time employee vs. average number of full-time employees | 0.4 | |
| Annual Hog Production | ||
| 1,000–10,000 vs. <1,000 | -5.3 | |
| Over 10,000 vs. 1,000–10,000 | 21.6 | |
| Over 10,000 vs. <1,000 | 16.4 | |
| Region of Employment | ||
| Northeast vs. Midwest | -0.5 | |
| Southeast vs. Midwest | 6.4 | |
| West vs. Midwest | -12.2 | |
| Notes | ||
| Midwest region: IA, IL, IN, MN, MO, ND, NE, OH, SD, and WI. | ||
| Northeast region: CT, MD, ME, MI, NJ, NY, and PA. | ||
| Southeast region: AL, FL, GA, KY, LA, MS, NC, SC, TN, VA, and WV. | ||
| West region: AK, AR, AZ, CA, CO, HI, ID, KS, MT, OK, OR, TX, UT, WA, and WY. | ||
As expected, workers who know more earn higher wages. On average in 2000, when comparing workers who have the same amount of experience and tenure and work for similar-sized operations in the same region, those with a high-school diploma earned 11.4 percent more than high-school dropouts. Workers with a two-year college degree earned 11.4 percent more than high-school graduates, and workers with a four-year college degree earned 12.8 percent more than graduates with only two years of college—and 24.2 percent more than those who only graduated from high school. Moreover, between 1990 and 2000, there was a decrease in the value of a high-school diploma and four-year college degree, and an increase in the value of a two-year college degree.
In 2000, workers with one additional year of job-related experience earned 0.7 percent more than average, and workers with one additional year of tenure with their current employer earned 0.2 percent more. However, the advantage of having more job experience and tenure gradually decreased over the decade.
As in other industries, women working in the pork industry in 2000 earned 23.8 less than men—even after adjusting for education, job experience and tenure, size of operation, and location. For women, this represents an improvement over 1990 when they earned 30.9 less than men, but is a step backwards from 1995, when women earned only 17.5 percent less.
Larger operations pay higher wages. On average in 2000, the addition of one full-time employee to a firm’s payroll increases the wages of all workers by 0.4 percent—a result that has not changed much from 1990 to 2000.
The relationship between operation size and average wages, however, was not linear. Workers in small operations (producing fewer than 1,000 hogs per year) earned 5.3 percent more than those working in medium-sized operations (producing between 1,000 and 10,000 hogs per year). Similarly, workers in small operations earned 16.4 percent less than those working in large operations (producing more than 10,000 hogs per year). It is interesting to note that between 1990 and 2000, the wages paid by large operations decreased relative to small operations, but increased relative to medium-sized operations.
Regional differences are also apparent in our survey data. In comparison to the Midwest region, workers in the Northeast and West are paid less, whereas workers in the Southeast are paid more. From 1990 to 2000, wages in the Midwest increased in comparison to the Northeast and West, but decreased in comparison to the Southeast.
The NPPC-NHF surveys also allow us to look at how wages in Minnesota’s pork industry compare to the national pork-industry average, and how the national average wage in the pork industry compares with other U.S. industries. Figure 2 shows average pork-industry wages in Minnesota and nationally for 1990–2000, as well as the average wage of civilian workers for the economy as a whole (as reported by the U.S. Bureau of Labor Statistics).
In 1990, the average national wage in the pork industry was only $18,900, and pork-industry wages in Minnesota—at $17,500—were even lower. The national wage was 18 percent lower than the average civilian wage of $23,000. Moreover, in 1990 Minnesota’s pork-industry wages were 7 percent less than the national average, and 24 percent lower than the average civilian wage.
Between 1990 and 2000, the wage gap between the Minnesota and national pork industries closed—as did the gap between the national pork industry and the average civilian wage. The average wage in the pork industry has risen to within 1 percent of the average civilian wage. Similarly, the average wage in the Minnesota pork industry was only 3 percent less than the national pork-industry average, and only 4 percent less than the average civilian wage.
Figure 2 shows that wages in the Minnesota pork industry have persistently lagged behind the industry as a whole—but also shows that, during the past 10 years, this gap has been closing. What is responsible for the persistence of lower-than-average wages in Minnesota, and why has this gap been closing?
Figure 3 shows that the educational attainment of employees in the Minnesota pork industry lags behind the national average. About 43 percent of Minnesota and, indeed, 43 percent of all pork-industry workers have only a high-school education. Most workers in Minnesota who extended their education beyond high school obtained a two-year college degree, whereas most workers outside Minnesota obtained a four-year college degree. Similarly, the average worker in Minnesota’s pork industry has significantly less job experience and tenure (12 months and seven months, respectively) than the average pork-industry worker in the U.S. Finally, a larger percentage of workers in Minnesota’s pork industry are women—13.8 as compared to 11.1 percent nationally. In summary, wages in Minnesota’s pork industry are lower than the national average because the state’s workforce is less educated, less experienced and tenured, and there are, proportionally, more women compared to the rest of the nation.
Pork-industry wages in 1990 were low in comparison to other industries, but strong wage growth between 1990 and 2000 made pork-industry wages more comparable with other industries. What accounted for this growth? An in-depth analysis of the survey data reveals that the reasons for the observed—and vigorous—growth in the early and late 1990s was powered by different factors.
In 1990, low wages in the pork industry made it hard to attract and retain the skilled employees the industry needed to grow bigger and introduce new technologies. To bring pork-industry wages more in line with other industries, there was a general increase in wages for workers throughout the industry. From 1990 to 1995, the wages of all pork-industry workers increased roughly $5,000—regardless of the workers’ education, job experience and tenure, size of operation where he or she worked, and employment location. While strong growth continued from 1995 to 2000, not all employees benefited equally from a further overall boost in wages of roughly $5,000. Instead, a worker’s wages increased only if he or she returned to school for more education or went to work for a larger operation.
Today, the pork industry offers competitive wages and attracts skilled workers to well-paid jobs throughout Minnesota. No one, however, should expect pork-industry wages to outpace the economy as a whole, because the industry has achieved near parity with the average national civilian wage. Nonetheless, individuals in the pork industry can still increase their wages in the coming years by becoming more educated, acquiring more on-the-job experience, and accumulating more years of tenure on the job.
Terrance Hurley is an assistant professor and extension economist and Pascal Elisabeth is a research associate in the Department of Applied Economics at the University of Minnesota.
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