'Reckoning long in the making': Orchards paying low wages have no long-term future, economist says

Economist Shamubeel Eaqub predicts crop losses, farm failures and higher consumer prices if the seasonal worker shortage can not be resolved. Photo / File

A shock to labour supply in Hawke's Bay's horticulture and viticulture industries has brought forward "a reckoning long in the making", an economist says.

Shamubeel Eaqub said a fast-approaching seasonal worker shortage, caused by Covid-19 complications, was set to cause a "Mexican standoff" that could reshape one of the region's biggest industries.

"The industry does not want to pay higher wages, but the labour supply is not there."

New Zealand Apples and Pears CEO Alan Pollard said the issue is not paying higher wages to attract employees, but that the work is so physically demanding only a certain percentage of the population can do it.

The supply of workers both through RSE schemes and people on working holiday visas has been hammered by the pandemic, leaving growers and other stakeholders looking for solutions to the shortage.

Eaqub said the situation could lead to crop losses, farm failures and higher consumer prices, but also force some larger changes and evolution.

"Our horticulture industry has long faced shortages of workers," he said.

"The work is hard, benefits from experience and skill, and the pay relatively low."

Economist Shamubeel Eaqub predicts crop losses, farm failures and higher consumer prices if the seasonal worker shortage can not be resolved. Photo / File

He said the average income per filled job in the horticulture and fruit growing industry was a little over $30,000, about half of the national average, and with the government's conservative approach to the border, low cost labour was not likely to be available anytime soon.

"Some will choose to pay higher wages to attract what labour they can - but they may not be experienced and thus not very efficient, so may end up eating up a lot of the profit in the sector," Eaqub said.

"As a whole the industry's sales (for the 2019/20 harvest) was $4.5b, wages paid of $820m, pre-tax cash profit was $942m. So there is potential to pay much higher wages by sacrificing profits if they want to."

He said that is not the case for everyone, so segments of the industry doing well will pay more to attract staff while others suffer.

"There are only so many people willing to work in the sector, so they will move to the farms offering higher wages," Eaqub said.

"It may be harsh, but perhaps it is a reckoning long in the making. Farms and firms reliant on low cost wages have no long-term future."

The economist said a sudden stop like this one leaves limited time for change, but in the future the industry will likely shift significantly towards mechanisation and automation.

Eaqub pointed to California in the United States as an example, where tighter migrant labour supply restrictions saw a move to mechanised nut picking.

Pollard said it would mean the adoption of new technology will be accelerated, but robotic harvesting is still years away:

"When you pick an apple, you've gotta make a decision on its foreground and background colour before you can decide whether it's at the level of maturity to pick it."

He said the technology has to be able to make that same decision, in all different conditions.

But Pollard said with the projected worker shortage there are likely to be more mobile platforms in operation this summer to make the job easier.

He said that while wages will increase through pressure from supply and demand, there are greater barriers to securing the workforce required.

"We should always be mindful of what's being offered, and we should also always be ensuring that what we offer is a fair and reasonable wage," Pollard said.

"In the orchard, workers can earn on average at or a bit above the living wage, which means that some would earn higher than that and some would earn lower including the minimum wage."

When asked whether growers could stand to sacrifice some of their profits to pay workers more, Pollard said they will do what they have to do to ensure the crop is harvested, since it is crucial to underpinning the local economy.

Alan Pollard wants the government to help the horticulture and viticulture industries get their crop picked this season. Photo / Warren Buckland

Hastings Mayor Sandra Hazlehurst has said there are 8000 permanent jobs in Hawke's Bay that depend on seasonal workers being able to get all the fruit picked.

And Pollard said the prices consumers will face to buy their fruit depend on that as well:

"If we're not able to get the crops off the trees and there's less available to market, then very clearly that's probably going to have some impact for consumers.

"We're working really hard with Government to try and avoid that situation."

Central government announced this week visa extensions for some 11,000 working holidaymakers that can remain in New Zealand over the harvest months.

Pollard said that is a good start, although the working holidaymaker pool is considerably smaller this year than the 50,000 that are normally in the country.

He said more action is needed on two other fronts that contribute to the seasonal workforce; locals and Regional Seasonal Employment (RSE) workers.

"The industry has an obligation, and it takes it seriously, to get as many, particularly unemployed or displaced, New Zealanders into work as it can," Pollard said.

He said the tricky part is knowing how big that group might be, especially with the Treasury's Pre-Election Economic and Fiscal Update projecting unemployment to be lower than expected.

Pollard also wants to see the normal Pacific Island workforce allowed back to fill the hole.

"Unlike rugby players from Australia or America's Cup crews from America, the workers would be coming from Covid-free countries," he said.

The National Party on Thursday promised to bring RSE workers into New Zealand if it is elected.