Apple production costs are expected to rise due to minimum wage

Total costs of apple production for typical farms in 2014 by cost categories and average wage rates, own data.

Apple production is characterized by intensive labor use. Manual work is required for pruning, fruit thinning and harvest and usually carried out by rather low-paid unskilled seasonal workers.

Although wages differ widely between the countries in the agri benchmark Horticulture network, the importance of hired labor costs is very similar at a level of about 25% of total costs. The introduction of changes of minimum wages leads to changes in the cost structure of apple production.

Average wages vary widely between the typical farms in the different countries in the network. In South Africa hourly wages below 2 € are paid, while in Italy labor cost are about 13 € per hour. However, the relative importance of hired labor costs is surprisingly similar between the countries with around 23 to 25% of total production costs. The Italian apple farm in Trentino (IT_2.5_T) is an exception with only 8%, relying mainly on family labor, which is accounted for in the rather high opportunity costs.

Effects of minimum wages could be observed in South Africa, where minimum wages for agricultural workers were increased by 52% between 2012 and 2013. As a result, the share of hired labor costs for the typical farms went up from 23 to 32%.

In Germany, a general minimum wage was introduced in 2015. For workers in agriculture, the minimum wage will increase gradually from 7.40 € in 2015 to 9.10 € by the end of 2017. Calculations based on the typical farms indicate that the share of hired labor costs will increase from 23 to about 30% during this period, leading to an increase in overall production costs of about 7%.

Within the European Union, minimum wages range from 1.24 Euro per hour (in Bulgaria) and 2.55 Euro per hour (in Poland) to 9.67 Euro per hour (in France). On the one hand, the differences in wages motivate labor migration and facilitate supply of seasonal labor for manual work such as apple harvest. On the other hand, low labor costs are an important aspect of competitiveness of fruit production, and may have played an important role for Poland in becoming the largest apple producing country in Europe.

Detailed information you find here:

Auswirkungen des Mindestlohns in Landwirtschaft und Gartenbau: Erfahrungen aus dem ersten Jahr und Ausblick
(Thünen Working Paper No. 53, including English summary, pdf, 684 KB)

For references and more information contact:

Hildegard Garming