Going into debt to cover labor costs turns out not to be a popular option for Oregon farmers.

Who would have guessed?

Two years ago, the Oregon Legislature voted to phase out the overtime exemption for farm work.

Under the law, farmworkers were owed time-and-a-half wages after 55 weekly hours of work beginning in 2023. In 2025, overtime will begin at 48 hours of work, and after 40 hours per week beginning in 2027.

Legislators understood that growers would face additional costs as the exemption was phased out. To ease the financial burden, legislation ending the exemption included a refundable tax credit that pays for part of the additional labor costs, varying by year and the number of farm employees.

But, farmers pay for labor as it is expended, and waiting for some of those costs to be reimbursed later by the tax man creates a cash flow problem. So, the legislature put up $10 million for a “repayable award program” that would lend producers with gross revenues of under $3 million up to $40,000 during the season to help cover labor costs. The loan would then be repaid once the tax credit was realized.

The program has disbursed just over $630,000 of the allotted $10 million since it began accepting applications in April 2023. Thirty-seven producers have applied for the program, and 26 have received funding.

No one in agriculture is much surprised. Taking out a loan on a yet-to-be-realized tax credit sounds like sucker’s bet.

“Our members already know that they’re going to face pressures related to the cost of labor,” Jenny Dresler, a representative of the Oregon Farm Bureau, said. “So that program is essentially taking a loan out on an uncertain future.”

The economics of agriculture remain unchanged since the exemption was enacted more than 80 years ago.

Farmers who grow labor-intensive crops such as fruits and vegetables require a lot of workers during critical periods in the growing season, especially during harvest when they scramble to bring in the crop ahead of bad weather.

Farmers are still price takers, not price makers, who cannot simply pass along higher labor costs to consumers the way retailers and manufacturers, though limited by the impacts of competition, do.

As the exemption is being phased out, producers of labor-intensive crops are making choices — switching to less labor-intensive crops of lower value, investing in greater automation, or selling out to larger operations that can better spread out the impacts of higher costs.

The state’s loan program was a well-meaning gesture, one that appears to have given a handful of farmers some needed breathing room.

But, it’s not a viable solution.

Faced with ever-growing labor costs, producers are implementing long-term solutions the don’t involve taking out loans against tax credits.