By James Wright, Senior Editor
Published on Sunday, January 01 2012
Originally published in Seafood Business Magazine
Labor issues leave seafood companies searching for solutions
There will always be the fillet knife, the oyster shucker and the crab mallet. Even with state-of-the-art stainless-steel equipment standing in nearly every seafood-processing facility from the Aleutian Islands to the Mekong Delta, the basic tools for the nitty-gritty work haven’t changed that much — but where those jobs are and who holds them have. Like many consumer goods, more and more seafood is processed where labor is most affordable, regardless of where the fish was pulled out of the water.
Over recent decades, as U.S. seafood companies turned to distant reaches of the globe for their crabmeat, whitefish or other seafood supplies — 85 percent of the U.S. seafood supply is now imported, compared to roughly 50 percent in 1991 — they helped create thousands of jobs in such places by sending raw material there for processing and re-export, often right back to the United States. Fish-cutting and shrimp-peeling jobs in the United States that paid several dollars an hour were filled in Southeast Asia for a few dimes.
Outsourcing work to China, Vietnam and Thailand, or moving tuna-canning operations from one South Pacific island nation to another, has saved seafood companies bundles. The Asia-Pacific region is a powerhouse in processing and production, thanks to cheap labor and a booming aquaculture sector that accounts for 89.1 percent of the world’s farmed seafood output, according to the United Nations’ Food and Agriculture Organization. Such success, however, has brought up living standards and labor costs in China and developing countries and promises to bring up the price of seafood as well.
While some in the United States work to reverse overseas employment and sourcing trends, serious questions cloud the future of domestic processing and other seafood jobs, most centering on money: With the economy imposing austerity measures on corporations and consumers alike, can seafood processed on American wages compete or simply fill a niche? Who’s going to take these jobs, if the U.S. government can’t settle the ongoing migrant-worker visa issues the seafood industry relies on?
Despite political and global economic pressures and a graying U.S. seafood industry, optimism isn’t completely void. Bruce Schactler is the director of the National Seafood Marketing Coalition, a group of 70-plus organizations based in Wrangell, Alaska, that seeks to galvanize the domestic seafood industry to promote its products more effectively. He says a solid marketing program backed by education and product development is a surefire economic solution and job creator. But it’ll need lots of help, beyond what the industry alone can provide.
“Whether it’s lobster in Maine or catfish in Alabama, we’re all just a bunch of guys trying to produce food and make a living doing it,” says Schactler, a commercial herring and salmon fisherman in Kodiak, Alaska. “For food producers on land, there’s a tremendous amount of infrastructure and support and that’s missing for seafood. Seafood is way behind.”
Schactler’s group in October released a white paper using National Oceanic and Atmospheric Administration data that provides what he calls a “view from 30,000 feet” of the impact that seafood jobs have on the U.S. economy: The seafood industry employs more than 1 million people each year and generates $116 billion in annual sales and $31 billion in “income impacts.” The industry is a network of thousands of small businesses across the country that are the “very reason for many communities’ existence, but for numerous reasons it has not kept pace with the rapid globalization of the world marketplace. This has led to a significant loss of overall market share for its products.”
A thriving seafood industry backed by a comprehensive marketing plan and long-term investments, Schactler contends, would employ more than just fishermen, processing line workers and salesmen; it would expand the transportation, storage and other service industries, extending all the way to retail and foodservice.
“One thing leads to another, and you gotta start someplace,” says Schactler. “If you can create demand, and you extrapolate that further into new products, new forms, new species, and then start increasing the volume of dollars, investment will follow. It’s all about the money.”
Schactler’s home state is the United States’ leading seafood-producing region, accounting for more than half of all U.S. seafood landings in terms of volume, some 4.3 billion pounds in 2010. But as healthy and robust as its resource is, Alaska has its share of challenges.
“Logistically, we are a foreign country,” says Schactler. “The money it costs to get stuff from here to there is astronomical.”
That “stuff” includes the labor force. Alaska seafood companies transport processing workers from thousands of miles away to toil in cold and wet processing plants in remote areas of the state where, once their shifts end, there’s little else to do. For many young Americans, particularly college students on summer break, that was one of the draws: Go work on the salmon-canning line for two or three months and come home with several thousand dollars and hopefully all of your fingers. They’d keep nearly all the money they made if they stayed out of the saloons.
Those days seem like a long time ago, says Brandii O’Reagan, a quality-assurance manager at Icicle Seafoods’ plant in Seward, Alaska, and owner of auditing company Integrity Inspection Services. The lifelong Alaskan, 39, has worked in commercial fishing and seafood since 1991 and is growing more concerned about a future with fewer fishermen entering the business and fewer American processing workers coming to the region each year. Additionally, many plant managers are nearing retirement age, with “nobody waiting in the wings,” she says. Only now, O’Reagan adds, is the industry starting to acknowledge the problem of a dwindling and aging workforce.
“When I started, when we were hiring people, there was a row of 80 college kids with their backpacks, lining up to work for $6.40 an hour,” she says. “Now we’re starting them at $7.25, 20 years later” and the money they stand to make might not “get them up here and back home again. We don’t have Americans anymore; 80 to 90 percent are Hispanic or J-1s from Eastern Europe.”
Visiting workers need either J-1 or H-2B visas to work in American facilities, but there are strict limits on how many of these visas are issued, when they’re issued and for how many years — not to mention all the hoops that employers have to jump through and the up-front money required to get workers on site, on time. O’Reagan says establishing skilled-labor continuity is a struggle.
“The work is getting done now, and the positions will be filled. But quality, consistency — those things could suffer,” she adds. “One day we’ll say, ‘How did we get here?’”
Schactler agrees that incentive to accept oft-grueling fishing and seafood jobs is lacking, and that there are even fewer resources available to the next generation of potential harvesters.
“I got a 58-foot boat, been in the business for 40 years,” he says. “But an 18-year-old kid, how’s he going to get into the business? A boat is a million dollars. And how are the old guys going to get out of the business?”
H-2B, or not to be
Political struggles over the H-2B program are inevitably tied into the heated national discussion regarding immigration and unemployment in the United States. Solutions have been difficult to reach because the issue is so emotional, says Roy Camblin, who was CEO for San Francisco-based CleanFish for about one year, ending in March 2010.
Camblin is working on a book and blog on LinkedIn titled “Jobless in America: In Search of the Root Cause and the Path Back to Prosperity.” In it he shares experiences of his long career in leading turnaround efforts for once-struggling corporations CitiBank, Wells Fargo Bank and Oracle, among others. Camblin, who’s lived and worked all over the world, admits he has trouble identifying with today’s American worker.
“The workforce in America has lost its edge,” he says. “It’s, ‘What are you going to do for me?’ No work ethic. No get-off-your-ass spirit that we used to have.”
Camblin estimates the U.S. unemployment rate, which was 8.6 percent at the end of November, is probably closer to 30 percent, once people who have stopped looking for work and other factors are considered. A rigid political climate, however, makes difficult solutions even trickier. “If we’re serious about jobs, we need to sit down and pool together,” he says. “We’ve lost that ability to have that dialogue as a nation or in any particular industry.”
Even with millions of Americans out of work, many of them publicly protesting the widening income gap between the rich and poor, U.S. seafood companies have seasonal openings they struggle to fill — jobs that pay more than minimum wage. But standing for hours to peel shrimp and crawfish, pick crabmeat and cut catfish fillets doesn’t appeal to many Americans, even those with few job prospects, so processing companies turn to migrant workers from places like Mexico and Guatemala. In many instances, federal migrant worker programs like H-2B and J-1 have saved U.S. seafood processors.
But the programs themselves are in peril and, according to some in the industry, don’t facilitate forward thinking — particularly H-2B. Over the past 20 years, two-thirds of Maryland’s crab houses have gone out of business, according to the Chesapeake Bay Seafood Industries Association, due to a depleted resource and competition with less-expensive imports. Surviving companies, using mostly Mexican laborers, make do with razor-thin margins, sometimes as little as $1 per pound of picked meat.
In September, interest groups representing various industries, such as lodging, forestry, landscaping and seafood processing, sued the U.S. Department of Labor in federal court in Louisiana, alleging that a proposed prevailing wage rule will make labor costs prohibitively expensive (30 percent to 50 percent higher).
The effort earned processors a two-month reprieve from the mandated pay increase — the result of a lawsuit brought by advocates for low-wage workers who sought to boost seasonal workers’ pay. Maryland crab processors, which employ 250 to 300 seasonal workers during crab season, have long stated that the timing of the job allocations — companies can apply for help from a pool of 66,000 workers a year, however, the visas are typically exhausted before many seafood processors begin a work season — always leaves them in a bind and in need of emergency assistance from legislators. Sen. Barbara Mikulski (D-Md.), who’s rescued regional crab businesses in the past with eleventh-hour extensions and exemptions for companies that rely on the H-2B worker visas, wants fair wages for everyone, established by a free-market system. A “one-size-fits-all approach on new regulations” won’t work for domestic seafood producers, she says, adding she “will not stop fighting” until a long-term solution to the migrant worker visa issue is in place.
Until she or another lawmaker is successful, the Band-Aid reforms may continue: On Sept. 21, the U.S. Senate Appropriations Committee passed Mikulski’s amendment to delay the implementation of the H-2B prevailing wage increase for a year, until Oct. 1, 2012.
For domestic seafood processors like Gary Bauer, it’s little consolation. Bauer, owner of Pontchartrain Blue Crabs in Slidell, La., has participated in the H-2B program for the past 11 years and relies on migrant workers to do a specialized job he says Americans don’t know how to do and are unwilling to learn. Without help from Mexican laborers, Bauer’s work force would shrink from the 80 migrant workers he employed this past summer and fall to about a dozen year-round employees. And then he’d be even more dependent on imported product, which he started bringing in a few years ago out of necessity.
Offering more money to attract American workers ultimately wouldn’t work, he adds.
“Whatever the magic number is, $11, $12, or $20 an hour, the other half of the equation is the American consumer affording that product,” says Bauer. “It’d make it out of reach.”
Companies like Pontchartrain Blue Crab struggle even with an abundance of help. Bauer says processors have to guarantee 75 percent of the workers’ seasonal contract, even if a hurricane were to wipe out production and destroy his processing facility, which happened during Hurricane Katrina in 2005. Employers must apply for visa workers 120 days in advance; those using migrant labor are required by law to also post job-opening advertisements in a local newspaper for a minimum of two weeks — even though Bauer has not hired a single American worker through such ads over the past decade-plus.
“How does anybody make a business plan if you depend on H-2B labor?” he asks. “We survived Katrina. We survived the [BP] oil spill. But it doesn’t look like we’ll survive our own government.”
General consensus has the world’s population reaching 9 billion by 2050. How to feed all those people has become one of the great debates of our times, perhaps a defining one for this generation.
“The total number of human beings that have ever walked on this planet, going back 1.5 million years, is roughly 80 billion,” says Camblin. “That means that one-tenth of the entire history of human habitation is alive now, today. The implication of that is staggering and we’re looking at some tough times ahead, but solvable.”
Christophe Pelletier, president of The Happy Future Group in Vancouver, British Columbia, authored the 2010 book “Future Harvests,” which explores the challenge of meeting demand for a growing world with rapidly changing demographics. The self-described “futurist” consultant — his client list includes small businesses as well as some of the largest agribusiness companies in the world — sees protein production as an “interesting challenge but a huge opportunity,” one that will have a significant impact on jobs.
Meeting potential seafood demand from China’s middle class alone, which he says could increase by as many as 300 to 500 million people, requires industry and government to think “really far ahead to build all the production chains to feed the whole system, not just the people.”
He’s referring to aquaculture, which accounts for almost half of all the seafood that humans currently consume and figures to play a key part in global job and food security. Aquaculture relies on many different sea- and land-based industries to operate, starting with feed, which represents the industry’s biggest expense. Not far behind is labor, the costs of which are increasing where aquaculture is most prevalent.
For instance, China last April vowed to double workers’ pay over the next five years, or 15 percent annually. Could that prompt seafood businesses to seek cheaper labor markets elsewhere?
“Africa, in the 22nd Century, could follow the same pattern [as Asia],” says Pelletier. “China is investing a lot of money there, thinking about where they can buy the goods they will need in the future. That can happen only if their middle class keeps growing. The jobs in Southeast Asia could move to Africa, but there are obvious challenges.”
Pelletier sees growth in seafood jobs globally, if only in the short term. With so much economic turmoil and uncertainty around the world, what happens further down the road is anybody’s guess.
“Let’s put ourselves in the most favorable scenario: more demand for protein and seafood. And we’re able to meet that demand. More volume, let’s say there’s more jobs, but it depends on the wages. How is the market going to be competitive [with other job markets]? If [seafood] labor isn’t really inviting, you’re going to see jobs being replaced by machines,” says Pelletier. “More jobs in fish processing? I don’t know. I wouldn’t be surprised to see a 25 to 30 percent reduction in jobs, just for economic reasons.”