SHORTAGE OF UNSKILLED LABOR ON THE BACKSTRETCH AND FARM

The current problem for U. S. racehorse businesses (and all employers of unskilled labor) in finding and retaining employees has at least five causes:

  • The economy is at virtually full employment.
  • The labor-force participation rate has been declining for a decade and hovers close to a multi-decade low.
  • There is fierce competition among employers for U. S. Labor Department-issued H 2-B visas for seasonal unskilled workers.
  • Stricter federal policy on border security and illegals in the country is having an effect.  The Obama administration stepped up deportations and the Trump administration is accelerating the effort.  The number of illegals leaving the United States now exceeds the number coming in.
  • It is increasingly difficult to find employees who can pass a drug test as the pool of available workers declines.

The April 2017 unemployment rate in the United States stood at 4.4%, which is essentially full employment when people moving between and among jobs is allowed for.  However, the labor-force participation rate, defined as the percentage of working-age Americans who are either employed or looking for a job, is only 62.9 percent.  The labor-force participation rate declined from 66.4% in January 2007 to 62.9% in April 2017…and the multi-decade low was 62.4 percent in Setember 2015.

If more potential workers could be enticed back into the workforce, the labor-force participation rate would increase and the labor shortage of unskilled workers would be alleviated to an extent.  In the absence of this happening in a significant way, the competition for workers should eventually drive up wages.

The horse-racing business is already under pressure from stagnant revenues (i.e., pari-mutuel wagering and purses), so hefty increases in costs owing to higher wages would exacerbate the problem.

Even if the federal government were to significantly increase the number of H 2-B visas, horse-racing businesses would have to compete against a plethora of other employers of unskilled workers for the visas.  In addition, horse-racing businesses need full-year workers rather than seasonal.

The alternative is, of course, for employers to continue to hire illegals.  The Wall Street Journal recently wrote in “Crackdown Causes Unease on the Backstretch”:  “At racetracks around the country, many of the grooms, exercise riders, and stablehands have green cards or full citizenship, but a greater number are in the country illegally, according to immigration lawyers and trainers.  Other workers come and go on temporary visas.”

Thus the low-skill workforce in the horse-racing industry is predominately illegal, which is precarious, owing to ethical issues and possible fines and adverse publicity.

Whereas manufacturers can move plants to low-wage countries and service companies–like accounting and computer services–can outsource work offshore via the Internet, restaurants, landscaping firms, and horse-racing businesses on the backstretch and farm mostly cannot.  To the extent possible, the answer is to automate labor-intensive processes and to make the pay more attractive.  Barring that, some businesses will continue to run the risk of hiring illegals and others will downsize or cease operations.

Copyright © 2017 Horse Racing Business

 

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