Labor Market

Abstract

The Poultry industry has experienced dramatic changes in its labor market over the past couple of decades. This change of trends can be attributed to several factors but mainly the industrial revolution it underwent. Since its origin, the poultry industry continues to expand to meet the increasing demand for meat products in the United States.

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In the mid-1900s, chicken meat was considered a luxury good since the chicken industry revolved around egg production rather than meat. At that time chicken meat was nearly a byproduct of egg production. The only meat sold were hens too old to lay eggs making them a rare and expensive product. After World War II this all changed when a few giant corporations managed to monopolize the entire meat market in the United States. Through a cunning business strategy, companies like Tyson rule the meat industry virtually unchallenged. They were able to manipulate the laws of supply and demand by capitalizing on the revolution. Barriers of entry, economies of scale, and taking advantage of discrimination allow these giants to dominate the poultry industry.

According to Gerhard Adams “In economic theory, the law of supply and demand is considered one of the fundamental principles governing an economy”. The law states that as supply increases, the price will tend to decrease or vice versa as demand increases, prices will tend to decrease. Based on this law supply and demand should eventually meet at an equilibrium between price and quantity. This law can be applied to both the poultry market as well as the labor market although their graphs depict separate stories. According to Kirzner, the law of supply and demand is recognized almost universally as the first step towards understanding how market prices help shape production decisions. After researching this topic, I have come to realize that over time the poultry industry is developing and moving away from this universal law. This change is due to the fact that the poultry industry is becoming less and less competitive. The laws of supply and demand mainly apply in a free and competitive market which this industry is moving away from. Defiance from the laws of supply and demand has led to a substantial impact on the labor market hiding behind the scenes of the production.

Grilling and barbequing chicken is an American tradition, but it has been a long time since the chicken you eat has actually been raised on a farm. Over the past 5 decades, the broiler industry has been transformed from hundreds of thousands of small poultry farms scattered across the country to far fewer and much larger facilities concentrated in the south. The importance of this location will be noted later. Chickens today are mass-produced. Between 1950 and 2001 the number of broiler chickens has increased by more than eight billion birds, an increase of over 1400 percent. Inversely, during the same period, the number of broiler farms have decreased by 98 percent. 1.6 million broiler farms across the country have shrunken down to 27,000 farms today. A decrease in the number of companies producing a given product will decrease the demand for labor resulting in a shift to the left.

The decline of the family farms and the concentration of the industry into relatively few large corporations became the status quo. New technology has meant greater efficiency, achieving economies of scale. The industrial broiler production model allowed billions more chickens raised in fewer facilities with less feed. The discovery of antibiotics given to chickens in small doses kept the chickens healthy but also brought them to maturity faster. Technology changes can act as either a substitute for or complement to labor. When technology acts as a substitute, it replaces the need for the number of workers an employer must hire. In this case, large facilities have decreased the number of small farms needed in the workplace. Independent farmers struggled to keep up with costly state of the art equipment so small to mid-sized farmers began disappearing. This shifted the demand curve for labor left. “In the poultry industry about 99 percent of all broiler chickens are produced under contract with only about 50 companies in the U.S. It’s estimated that the 10 largest companies produce more than 60 percent of all the broilers.”

Barriers to entry have shrunk the number of competitors in this industry. By this time the previously considered luxury item became a common good driving down the price. Chicken companies essentially have spheres of influence across the US. Most farmers only live close to one of them creating a local oligarchy they must abide by. Contrary to the law of supply and demand wholesale chicken prices have shot up during the last couple of years. This is due to large chicken companies conspiring to fix, raise, and maintain the price of broilers. To put it simply, chicken companies are making huge profits when in a competitive market they should be breaking even. This comes at the cost of consumers paying more money and farmers being paid less often leading to them living in poverty.

In the book “The Meat Rachet: The secret takeover of Americas Business”, Author Christopher Leonard is an investigative journalist who explores the poultry industry and exposes how a few giant companies manage to monopolize the entire market in the United States. An aspect this book highlights is the fine line these corporations flirt with discrimination. Discrimination exists when minority workers who have the same abilities, education, training, and experience are treated inferior with respect to hiring, wage rate, promotion, or working conditions. The majority of the manual labor force are immigrant workers with little education, training, and experience. Upward mobility in the business is rare although occasionally low-level supervisor positions are rewarded to bilingual former line workers. Aside from a few acceptations, workers lack the ability to gain human capital making it impossible to better their career. Over time this labor market has become repressed, working in poor conditions. “They work covered in feces, fat, skin, and blood, suffer among the highest rates of occupational injury and illness in any industry, and receive little training, no job security, and vanishingly opportunities for promotion. They are rarely union members and have few avenues for raising complaints or making claims.” As these operations have grown bigger they have grown regionally concentrated down south in what is known as the broiler belt. Rural locations in the south allow large companies to take advantage of lower minimum wage laws driving down their cost of business. These operations also have a high turnover rate making promotion and long-term benefits unlikely.

Laborers whose salary is based on hourly wages are being paid far less for starting salaries compared to laborers in the 1990s. They are paid forty percent less than the average manufacturing worker. This contradicts the laws of the labor market since wages should be increasing with the price and quantity of the product. Unions have little presence in this industry. “[The large companies] draw their workforce from the secondary labor market, require little worker skill, and provide little training. Firms do not invest in their workforce, and workers become fungible and easily replaceable, with low bargaining power. The results are low wages and insecurity.” Although this business practice is technically not illegal, many consider the large corporation’s scheme unethical. Leonard explains that the terms in contracts between companies and farmers make it easy for the companies to cancel giving them a disproportionate advantage over the farms. “While poultry processors contract with individual farmers to tend company-owned birds according to detailed specifications, the full burden of waste disposal frequently falls on the individual growers. They may not make enough money to pay for proper waste management, and poultry processing companies are often not held legally responsible for cleaning it up.” In addition, most contracts only last for a short period of time from just one flock of chickens to a year allowing them to restructure the contracts to their greedy benefits. These large factories operate in rural confinement hidden from publicity blowback in the public eye.

The broiler industry is no longer farming, it is industrial production. The monopolistic competition gives cruel and greedy firms market power controlling the price of products for consumers as well as wages paid to workers with little influence from the competition. Developments in technology have introduced an external labor market to the American chicken industry. In the wake of this, there has been a shift in lifetime career employment that is unfavorable to the labor force below a firm’s main core of managerial and supervisory positions.

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