FOCUS ON FARM POLICY: A farm policy to protect people, not commodities

By Michael Duffy
Associate director and
ISU Extension economist

The debate over the nation's next farm bill illustrates several of the problems that agriculture and U.S. society must address. The cost of the current farm program is becoming prohibitively expensive, especially in the midst of an economic slowdown. As it is structured now, the farm program hands out the biggest payments to the largest farmers. Despite vast amounts of money invested in the current farm program, the number of farmers continues to dwindle and environmental degradation is still being attributed to agricultural practices.

Many people ask how the current farm program can feature such uneven distribution of payments. In Iowa, for example, 10 percent of the farmers received 61 percent of the payments while the remaining 90 percent of the farmers received only 39 percent of the funds. Such discrepancies are not surprising considering that the majority of payments are dispersed based on the amount of commodities produced. The more you grow, the more you get from the government; and the bigger you are, the more you get.

Most of the American public gives little thought to the farm bill. They have food and as long as it is relatively safe, abundant and not too expensive, they really don't care about agriculture. However, this is changing. The cost of the current programs, the continued loss of family farmers, and the payments that disproportionately reward large operations are causing people to rethink how the money is being spent.

What type of farm program do we want? Do we support one that continues to favor commodity production? What other goals might our farm program have? Should we expect more from our farm policy?

Alternative proposals, presented by Senator Tom Harkin (D-IA) and Senator Richard Lugar (R-IN), would shift payments to reward conservation activities. I would like to offer another modest proposal that would represent a shift away from the current payment system, but (I feel) would be more in line with what Americans value.

Earlier this year I presented "A Guaranteed Minimum ##Wage for Farmers" at a field hearing conducted by the U.S. Senate Agriculture, Nutrition, and Forestry Committee. This was an alternative farm bill proposal I developed with Paul Lasley, an ISU sociology professor. Since the original presentation, I have received several reviews and additional comments that have helped refine the proposal. There was one complaint regarding the title of "minimum wage" and I have changed it to supplemental wage.

On these two pages is a discussion of the general concepts of my wage proposal. I hope to solicit more comments but more importantly, I hope offering alternatives for policy makers to consider will help improve the farm bill that eventually is passed.

Questions and Answers about a Guaranteed Supplemental Wage for Farmers

What is a supplemental wage for farmers?
In a farmer supplemental wage program, federal payments to farmers would be based on the amount of labor expended rather than the amount of commodities produced. Farmers would receive an average wage times the average number of hours they worked on the farm. Payments would be limited to full-time on-farm employment for each farm owner-operator.

Farmers could plant whatever crops they wished and receive the going market price for their production. There would be no government price supports, no loan deficiency payments, no emergency programs, and no land set-asides.

The government would support only actual labor. Any additional earnings would depend upon the management skills of the producer. Insurance plans, marketing tools, cost control measures, and other management tools would be available to the farmer. The return to management for farmers would depend on their management decisions.

How would the farmer supplemental wage be determined?
Farmers would be paid the average prevailing wage rate in their county or state based on some initially agreed-upon index. One example would be the average wage for Production, Construction, Operating, and Material Handling Occupations. In Iowa, the average wage rate for such occupations is $11.95 per hour.

How would the average number of hours be determined?
The time required for various farming tasks in typical enterprises would be established at the state level. Additional time would be allowed for a standard travel distance, maintenance and overall operation. For example, an acre of corn would be figured at X number of hours, an acre of soybeans would be figured at Y hours and a litter of pigs at Z hours. The average times are already known or could be estimated from standard engineering data. Farmers would receive the average rate regardless of how much time the task took on their farms. Eligible enterprises would be determined by those activities reported to the local Farm Service Agency.

How would it affect conservation?
Farmers would be required to meet all of the conservation requirements currently in place to be eligible for the program. This would include all the existing prerequisites, restrictions and conditions.

Farmers also would be able to earn additional hours for conservation or community betterment activities. Betterment activities would be things that enhance the appearance or overall functioning of the community, including improved farm appearance, volunteer work, and other community leadership roles. Conservation activities could include tree planting, wetland restoration, establishment of hiking trails for the general public, and other activities designated by the local conservation board.

Would there be payment caps?
Yes. A farmer would be paid only for the hours up to full-time employment levels, regardless of the size of the operation. The eligible hours would be the hours per enterprise for all the enterprises plus any extra hours. Full-time employment for a farmer is open to debate, but I propose to use an 8-hour day, 7 days a week, for 50 weeks, or 2,800 hours. If farmers worked less than 2,800 hours, they would be paid only for the time they worked. If they worked more than 2,800 hours, they would still be paid only for that many hours.

How would it affect beginning farmers?
This plan would offer encouragement to them. They could enter farming as local conditions allowed. They would be able to expand their operations and payments over the life of the bill. Because payments are based on labor, the distortions for the land market would be decreased and land rents and values would be more in line with their income-earning capacity.

What about other farm assistance?
No special programs for market or weather-related problems would be allowed, except for those provided by other agencies or programs outside the U.S. Department of Agriculture. Trade, research, conservation reserve and other secondary programs would be maintained. The extent and nature of these programs would be covered in other sections of the farm bill.

What are the benefits of such a plan?
For one, the budget exposure would be fairly fixed. The federal government would know within reason the total dollar outlay for this program. Farmers and lenders would know in advance at least a portion of the income expected for the year. State government also could estimate this portion of farmer income with greater precision.

This plan would not distort the market (except possibly the local labor market wage). There would be no set-asides or uncertain land retirement programs. Supply and demand would dictate prices for commodities. The impact on land prices and rents would be less than under current conditions.

This plan would treat all farmers equally. It would discourage the predatory practices we are seeing today as farmers try to increase production to increase government payments (i.e., farming the program rather than the land). Under this plan, farms could increase in size but the farmers would be paid only for the full-time labor equivalent for their operations, the rest would be up to them.

What issues are still unresolved?
Obviously, there would be many issues to address in a final form of this proposal. One of the most critical would be the level of supplemental wage to use and how it would be determined. There are concerns that a supplemental wage rate could impact the wage structure in a local area. However, I do not think that this distortion would be as severe as the current distortion in the land markets.

Decisions would have to be made about the extent and level of spousal income to be included. As conceived, the wage would be only for the operator who files the Schedule F tax return.

A similar but related issue involves contributions from underage family members. To some degree this could be handled by adding an age restriction and applying the Schedule F rules.

Specialty crops may present some problems because there may be no standard production time estimates available. In these cases, production time could be estimated by Cooperative Extension with input from commodity groups, state departments of agriculture, Farm Service Agency personnel, or other parties.

How people could change their enterprise mix, and how often it could be altered also need to be determined. As the idea was conceived, the enterprise mix would be established and in place until it was altered, perhaps once a year.

Why should we do this?
From the public's perspective, supporting labor in agriculture is preferable to supporting commodities. It will:

• allow the markets to function relatively freely,
• aid those who care for the natural resources of this country,
• help ensure that the nation's food supply doesn't become concentrated in too few hands, and
• give assistance equally, rather than favoring the largest recipients.

Farmers should think carefully about this proposal because it will allow them to participate in a free market at last. It would provide some support for their labor while it unleashes their ability to earn management income based solely on their own skills. They also should like this proposal because of its simplicity. There would be no second-guessing what the government will do with its payments, no marketing based on some artificial price, and no land set-asides. Farmers could produce whatever and how much they want. It would help level the playing field for beginning farmers and help end the spiral of trying to acquire more land regardless of the cost.

What are the chances for such a plan?
Probably close to none. The vested interest in maintaining the status quo is too great. There are numerous people who benefit from the government support of commodities and many of them are not farmers. Passage of a plan such as this will take time -- time for people to realize what they really want a farm program to accomplish and how they want to proceed.