Fish-o-nomics 101

 

 

Alaska leads the nation in unemployment, and fish processors in Bristol Bay are complaining they couldn’t find the workers necessary to head, gut and in some cases further process this year’s unexpectedly large bounty of sockeye salmon.

 

Because of this, commercial fishermen were put on limits to avoid plugging processing plants with too many salmon, which left most of them unhappy.

“I personally have driven through and away (from) more fish than I’ve ever seen in my life during a legal fishing opener. And that hurts,” fisherman Larry Christensen told reporter Caitlan Tan at KDLG in Dillingham.  The public radio station this year live-covered the Bristol Bay fishing season as if it were some sort of sporting event, and there are some similarities.

And while fishermen were unhappy with processors, processors were unhappy with the government which they blamed for making it hard to bring in foreign workers to process fish.

“This year, industry wide, I think the consensus would be that it’s worse than it has been in a long, long time,” John Garner, president of Seattle-based North Pacific Seafoods, told the Alaska Dispatch News. 

It was probably inevitable someone would point a finger at President Donald Trump. While Trump “didn’t ‘technically’ do anything to restrict H-2B visas (for foreigners),” Brian Gannon, a seafood employee recruiter, told the newspaper, “Trump taking office did have an indirect impact.”

Trump, in Gannon’s view, scared some processors away from the cheap, exploitable labor they need.

“‘We can’t pay $20 an hour for processing labor because there’s so many other regions of the world that don’t have the labor costs that we do,’ he said. ‘Salmon is a global commodity.'”

King of salmon

Salmon has long been a global commodity, but what’s different about salmon today is that it is also big business. A limited industry that used to be dominated by a handful of West Coast salmon processors has gone truly global since aquaculture started creeping into the picture in the 1970s and then exploded into the future.

Seventy percent of the world supply of salmon is now produced by salmon farmers, according to the World Wildlife Fund, and Norway is the world leader among farmed salmon producers.

Norwegian salmon processing workers are largely unionized, unlike those in Alaska, and when they threatened to strike in 2014, the minimum hourly wage was increased 5.85 Norwegian krone to 162.85 Norwegian krone or $20.56 at today’s exchange rate.

The average Alaska wage is less than half that. There are regions of the world that do have lower labor costs than Alaska, which is why a lot of Alaska salmon is now simply headed and gutted and shipped to China for further processing. But as Norway illustrates, there are areas that have significantly higher labor costs as well.

One can argue that Alaska’s processing problem is that it has become harder to get the OK to use cheap, foreign labor to process fish in the 49th state. But one can also argue Alaska’s problem is that processors demand cheap labor.

“They don’t pay enough; they’re on a slime line; and they’re way out in the middle of nowhere,” Anchorage economist Scott Goldsmith said bluntly. Given those things, fish processors attract fewer and fewer Alaskans willing to give fish processing a go.

“If the pay is not high enough, you’ll hold on and look for something else,” Goldsmith said. “Maybe a construction job closer to home. It’s a mismatch of the available jobs and the people looking for work.”

Tough work

Commercial fishermen in Alaska like to brag about how hard they work, and they do work hard. But the truly laborious work comes in fish processing factories where people serve 10, 12 or more hours per day on their feet in the wet and cold and blood cutting fish.

El Nuevi Dia, the best-selling newspaper in Puerto Rico, published a lengthy expose last month it titled “Puerto Rican Nightmare in an Alaska Factory.” 

In the story, Puerto Rican workers claimed they signed up to work at a Silver Bay Seafoods factory in Sitka only to end up at the company’s new plant in Naknek on the edge of Bristol Bay.

One of the main players in the El Nuevi story is a “25 year old (who) abandoned his
work on the Luis Muñoz Marín International Airport ramp, where he earned the minimum wage, to work in a processing plant for salmon in Alaska, where he had been assured that he would make $10,000 for up to three months of work.”

The newspaper said the young man was one of three among 250 Puerto Ricans who went to work in Alaska only to later contact a reporter “to denounce the experiences of humiliation, exploitation and abuses they faced.”

They complained of being housed in a “bunker” in Naknek with no heat and no hot water, and forced to work their first 190 hours to pay Silver Bay for room and board before they could collect any wages.

KDLG’s Dave Bendinger has since reported that an Occupational Safety and Health Administration (OSHA) investigator is looking into complaints against Silver Bay, a Sitka-based processor started by a collective of limited-entry permit holders. Silver Bay has been a leader in the new practice of heading and gutting fish and then shipping them to China to have cheap Chinese labor remove pin bones to create “boneless filets.”

“Who made the complaints and what they alleged has so far not been made public. Naknek residents and Silver Bay fishermen who spoke with KDLG throughout the season described an unusually high washout rate from the processing plant, which was new to Bristol Bay as of 2014,” Bendinger reported. “Complaints of poor food, poor treatment, high numbers of injuries, and large walk-offs circulated around the Bay.”

The Puerto Ricans took the situation seriously enough that the governor of Puerto Rico complained to Alaska Gov. Bill Walker when the two met at a meeting of governor’s in Rhode Island in July.

If even a fraction of the El Neuvi story is true, it pretty well defines a job most Alaskans, or for that matter most Americans, don’t want.

Back in the day, Alaska Native villagers flocked into fishing towns to provide processing labor, but they don’t show up anymore. The combination of small dividends from Alaska regional Native corporations, various types of government assistance, subsistence hunting and fishing, and some barter now allow people to stay at home who in the past might have had little choice but to go looking for cannery work to earn some cash.

“In the big, remote stretches of northern and western Alaska, many households keep themselves going with a mix of cash, subsistence, sharing, and other non-cash trading,” Goldsmith wrote in a 2008 study of the economic difficulties plaguing rural Alaska. 

If people can patch things together that way to make ends meet, why leave home for a difficult, low-paying, and abusive job elsewhere?

The real problem

Processors in Alaska are in the business of trying to make money. It’s not easy.

Where Norway has tried to maximize the value of its farmed salmon by encouraging production efficiency, Alaska has done the opposite. In a report on Norwegian industries, DNB Bank notes the “value creation per employee is three times greater than the national average” in the fish farming business, and Norway is home to Scandinavians famous for their work ethic.

While Norway has been encouraging those people to turn salmon into a feedlot business, Alaska’s salmon cowboys have encouraged government to focus on maximizing the inefficiency. The state’s most efficient form of harvest – the fish trap – was banned long ago.

Then, to protect individual wild salmon stocks, commercial fisheries have been moved closer to stream mouths and seasons have been shortened. The move is good for conservation, but bad for business.

Instead of providing a steady supply of fish over a long period of time, the salmon fisheries of Alaska produce a glut of fish in a short period. Alaska halibut fisheries used to operate this way, too. They were changed in part because short, fishing-derby-style openings were linked to high accident rates.

Instead of short openings for all fishermen, individual fishermen were given halibut quota based on their historic percentage of harvest. The quota system put fishermen on limits, but allowed them to fish when and where they wanted during a months-long season.

A 2015 study concluded such limited-based fisheries could cut accident rates up to 87 percent.That’s a significant change.

But what changed even more was the value of the fish. Halibut prices went from about $2 per pound when the program was adopted in the 1990s to $8 per pound by 2014, and they have continued to go up since.

Alaska halibut fishermen were aided in the market by the fact that there is little competition from elsewhere, but their ability to deliver fish fresh for eight months of the year was a big plus.

Though the fishermen did much better after individual fishing quotas (IFQ), there was little other benefit to the state. The $20-per-hour, fish-processing jobs of Norway failed to materialize. There were some truck driving jobs added in the state so that the halibut from Alaska’s number one commercial port – Homer at the south end of the Kenai Peninsula – could be trucked to Canada for processing, but that was about it.

The real winners

The Alaska economy overall has been getting cut out of Alaska fishery benefits for a long time now.

According to a new report from the United Fishermen of Alaska, the industry’s powerful political lobby, more than 6,500 Alaska fishing permit holders and crew based in state of Washington made $904 million off the state’s fish in 2015 — more than $300 million more than Alaska-based permit holders and crew.

Alaskans still hold the majority of limited-entry permits – more than 70 percent – but the high-value permits have largely moved Outside.

The report bragged that the commercial fishing industry remains Alaska’s biggest employer, but fewer than half the jobs employ Alaskans. And less than 30 percent of the state’s processing jobs now go to Alaskans.

In terms of economic benefit to the state of Alaska, the commercial salmon business overall seems to be going down, not up, despite record catches.

“Global exports of wild salmon caught off the coast of Alaska are struggling to compete with the international sales of salmon farmed in Norway,” The Fish Site reported this week.  

The story suggested the state may need to spend even more money to push Alaska salmon.

“Norway’s annual marketing budget tops $50 million, derived from a small tax on its seafood exports,” the story said. “That compares to an ASMI (Alaska Seafood Marketing Institute) export budget of less than $7 million from a mix of grants and federal dollars. The state of Alaska contributes $1 million to ASMI’s overall budget of roughly $22 million, of which $16.5 million is paid by the seafood industry. The state plans to zero out its funds to ASMI in the coming fiscal year.”

ASMI is a public-private partnership between the state and largely Seattle-based processors. It maintains offices in Juneau and Seattle and has been under some pressure from the Alaska Legislature to move more of its operations north. The $16.5 million “paid by the seafood industry” comes in the form of a state tax which is passed on to the marketing association.

It’s the equivalent of Alaska kicking back $16.5 million to the Alaska Petroleum Institute to help sell Alaska oil. But, of course, the state doesn’t do that. Instead it uses the taxes and royalties collected from oil to pay for most of the costs of running a state that actually manages to lose money on the commercial fishing business given the high costs of management and enforcement. 

The bright side is that the state subsidy of commercial fishing does provide about $22 million in revenue for Alaska municipalities. Still, in a state with struggling finances, it’s a drop in the bucket.

Alaska became a state in large part to break the stranglehold Seattle-based fishing interests held on the then territory and turn fish into an Alaska money maker, but the hold in some ways seems even stronger now than it was almost 60 years ago.