The plight of the sub-99%

February 21, 2012: 4:24 PM ET

Questionable labor standards don't just plague the makers of your favorite Apple products. There's still plenty of worker abuse right here on U.S. soil -- just look at who picked your market's winter tomatoes.

By Moshe Silver, Hedgeye

Our economy today is guided by the wisdom of the market, and our private and social lives benefit from a capitalist phantasmagoria of devices that entertain us, educate us, keep us connected with – or distinctly separated from the rest of humanity.

As a result, we suffer from a longstanding cultural blind spot: our society sees nothing below our own exceedingly high visual horizon. The chatter continues over inequality in our society – we read about allegedly grueling working conditions at Apple's factories in China on devices we can't put down. George Packer's article in the most recent Foreign Affairs summarizes a roster of fundamental inequalities – all demonstrably accurate: "Between 1979 and 2006, middle-class Americans saw their annual incomes increase by 21 percent. The poorest American saw their incomes rise by only 11 percent. The top one percent saw their incomes increase by 256 percent."

Yet, beyond Occupy Wall Street, there is a further substratum below the 99% that the current dialogue does not touch. We bemoan the plight of 14 million permanently unemployed Americans, but below even this structurally disadvantaged group, our society runs on an invisible chassis of human suffering.

Recently Trader Joe's signed an agreement with a group of Florida tomato fieldworkers that includes labor standards for farm workers, and adds one penny per pound to tomato pickers' wages, paid by the purchasing companies. Trader Joe's joins a roster that includes Whole Foods (WFM), McDonald's (MCD), Burger King, Yum! Brands (YUM), and major food service companies such as Aramark and Sodexo, all of whom have signed a Fair Food Agreement covering their purchases of Florida tomatoes.

The Fair Food Agreement, though it arises from leftist-style agitation and the involvement of NGOs such as Oxfam who are anathema to the right, looks like a triumph of capitalism at its idealized best. It includes, according to the press release, "labor standards developed in unique collaboration among farm workers, tomato growers, and the food industry leaders who purchase Florida tomatoes, with a small price premium to help improve harvesters' wages." The premium is the penny per pound of tomatoes. The labor standards include guarantees against abusive treatment and enslavement in the workplace. When end buyers such as Trader Joe's sign the agreement, it puts the growers on notice that they can no longer rely on, or turn a blind eye to abusive labor practices.

Anti-Slavery International says there are approximately 27 million slaves in the world today. According to the US Department of State, there are about 16,000 new cases of slavery within the United States each year, many the result of humans trafficked illegally from outside our borders, but also a significant number of US citizens. The DOJ estimates that 25% of slaves in the United States today are domestic workers. The Florida tomato fields have long been ground zero for slavery in the American labor force – one Floridan has said if you are eating a Florida winter tomato in the US, it is guaranteed that it was handled by slaves before it reached your grocer's shelf.

Earlier this month, we spent three days in dusty, dreary Immokalee, FL (sounds like "a broccoli"). Immokalee is not incorporated – it is not a "town," but a Census-Designated Place (CDP) under the Naples-Marco Island metropolitan area. This means its law enforcement officials are appointed by voters in the wealthy coastal enclaves, whose natural interest lies not in improving the lives of undocumented immigrants, but in keeping them far away from their neighborhoods. Immokalee is the heart of Florida's tomato-growing country and tens of thousands of migrant workers pass through during tomato season. No one can guess how many of these are slaves.

The 2000 census counted just under 20,000 residents in Immokalee: 71% Hispanic, 18% African American and 3% white. It is estimated that as many as half of undocumented immigrants may not be counted in a census, even if they are permanent residents of a town.

The majority of Immokalee's Hispanic residents do not speak English – even those who have lived there for more than ten years. Though categorized as "Hispanic," many are native speakers of indigenous languages, with only rudimentary Spanish. Their days typically start with a 5 AM worker selection at the central parking lot, followed by a bus ride to the tomato field where they sometimes wait for hours until the dew dries. (Tomatoes are finicky fruits and can not be gathered wet.)

The picking runs until dark, followed by a bus ride back. Depending on the location of the fields, the bus ride may be as much as three hours each way. Workers do not get paid for travel time, nor for time spent waiting to the tomatoes to dry in the sun. If it rains, the picking is called off and they do not get paid at all.

Pickers are paid 50 cents per 32-pound bucket of tomatoes. Thus, it costs the grower about $33 in labor per ton of tomatoes. Put another way: in order to earn enough to feed their families, a worker needs to haul two tons of tomatoes every day. If that 50 cents seems a pittance, consider that farmers have to plant, tend, sort, pack and ship their crop, and are at the mercy of the weather. One grower said it costs between $9,500-$11,000 to produce an acre of tomatoes, yielding typically 1,400-1,600 boxes. Returns vary, depending largely on the weather. This grower sells tomatoes as low as $3 a box – taking a 70% loss on the acreage – and sometimes as high as $29, though the highest prices correspond with extreme weather conditions and greatly reduced yields.

Profitability is difficult to pin down. Figures from the University of North Carolina school of agriculture show net revenues for a number of North Carolina tomato growers ranging from $1055.20 per acre, to as low as $140.58. Any way you look at it, this is a narrow margin business. Many things have to go right – weather, competition, demand and quality of a given crop – for a tomato grower to cash in.

The National Labor Relations Act of 1935 provided for unionization and collective bargaining, workplace safety standards and the minimum wage.  And it explicitly excluded agricultural workers and domestic help. Farm workers do not receive benefits or overtime, and children as young as 12 can be put to work. Agricultural operations in the US are also covered by Federal Marketing Orders, which exempt growers from antitrust provisions covering market domination and pricing.

The average tomato picker toils under miserable conditions. Add to that the all too common abuse in the fields, and the routine of tomato picking appears as one of the worst available human activities.

The Coalition of Immokalee Workers (CIW) was formed in 1992. The following year they discovered workers being held against their will near Immokalee. The group developed evidence which, working through local police, they presented to the DOJ. It took several years, and mounting evidence, but the DOJ finally intervened. Since then, the CIW has been directly responsible for uncovering and developing evidence leading to seven convictions for slavery and trafficking, resulting in the freeing of over one thousand enslaved field workers.

Largely through the CIW's success at bringing slavery to light, Congress passed the Victims of Trafficking and Violence Protection Act in 2000. The original version of the Act provided for incarceration of those who profit while "knowing or having reason to know" that they are benefiting from slave labor. This would have put farmers and end buyers on notice and would have had immediate impact on abusive behavior.

But at the last hour the language was cut. Now, Hispanic criminals who traffic people into the U.S. can be thrown in prison, but the companies who contract with them can walk away and find a new supplier. This leaves a crime that no one has incentive to report – slaves pick tomatoes cheaper than paid workers. The victims are often nearly as badly off once they are freed as while in captivity. They do not speak English, have no local network of friends or family, are physically and psychologically disabled, are not offered social services or medical care, and do not have a valid permit to remain in the U.S.

The CIW do not blame the capitalist system, nor do they blame farmers. All economic and social systems are subject to horrible abuses. The Coalition wants to work within the system America offers them. Far from asking the growers to give them something for nothing, the workers want a safe work environment and the ability to engage in the system themselves. Secretary of State Clinton presented the CIW an award in 2010 for their work against slavery. But their efforts to integrate the Fair Food Program into the consumption chain are moving slowly. One by one, Florida's growers have signed the Fair Food Agreement, but the program will only work when the end buyers are on board.

The CIW appears to have a straightforward capitalist overview of the entire business that understands how each component contributes, from planting to the dinner table. Their objective is to harmonize the entire chain and ensure their workers' place within it. We returned from Florida convinced that most Americans who are used to 9-to-5, minimum wage, lunch breaks and vacations, would never put themselves through what the average tomato picker does in the course of a day.

The CIW are an unusual group. For all they have suffered, they do not express anger or seek revenge. They see the big picture of the farming industry and know how well it can treat them – if only it stops abusing them. They want what everyone else comes to America for: a chance to earn their fair share in return for hard work, not to be given it for nothing.

Take a good look next time you eat a tomato.  It represents struggle and suffering.  Will it also come to represent the best our society has to offer?


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Hedgeye, a real-time investment research firm founded in 2008 by former Carlyle-Blue Wave portfolio manager Keith McCullough, operates as a virtual hedge fund. Staffed by research analysts from across Wall Street, Hedgeye offers fundamental, macro and sector analysis, present picks in a transparent way to its clients. It has built a stable of subscribers, which includes hedge funds and mutual funds, and recently launched a retail investor product.

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