The now long-gone cannery in Dundas Bay in Alaska’s Glacier Bay National Park, one of the many canneries that have disappeared from an industry in decline for decades/NPS photo

Salmon processors too poor to pay sick leave

Once the economic engine of the Alaska Territory, the commercial fishing industry in the 49th state is now in such dire straits that it says it can’t afford to pay for sick leave for fish processing workers.

The Pacific Seafood Processors Association, the industry’s trade group, has appealed to Alaska voters to turn down Ballot Measure 1 because it not only boosts the state’s minimum wage but “requires up to 56 hours of paid annual sick leave for all employees, including seasonal workers, and would negatively impact PSPA shoreside processors.

“The paid sick leave component of Ballot Measure 1 would add at least $16.5 million in estimated additional labor costs to the shoreside processing sector at a time when the Alaska seafood industry is already experiencing an economic crisis due to a significant number of global market factors combined with soaring operational costs.”

The two biggest “global market factors” facing the industry are that it produces a lot of low-value salmon products – canned salmon and fish meal from salmon fisheries now dominated by pink salmon, the smallest of the salmon species – and struggles to compete with high-quality farmed salmon that is either sold fresh to global markets or taken from the water, run through highly automated processing plants and flash frozen in a matter of hours to maintain the best flavor.

Alaska fishery economist Gunnar Knapp was the latest to warn processors of the market problems today inherent in the Alaska model.  A little over six years ago, he told a Seattle meeting of the International Institute of Fisheries Economics and Trade that the industry needed to adapt or face a continuing decline.

At that time, we noted the “disincentives for innovation” in Alaska, and the powerful political interests that seek always to maintain the failing status quo.

“Politics will (continue to) drive the extent to which the seafood industry is able to respond to future opportunities and challenges,” Knapp wrote. “My guess? Globally, fish and aquaculture politics will gradually shift to enable fisheries and aquaculture to better respond to future opportunities and challenges.”

Sadly, this is a transformation that dates back decades to the glory days of the Alaska salmon fishing business when, according to an Alaska Department of Fish and Game history,  160 canneries dotted the coast from Ketchikan north and then west to the tip of the Alaska Peninsula.

About 60 remain in existence, if not in operation, today. Three are tied up in litigation as Wells Fargo bank tries to recover part of $60 million in unpaid loans to the Peter Pan Seafood Company, once an iconic Alaska salmon processor.

Fish trader Roger May secured the company’s assets with a $37.2 million bid at an auction in September, but that bid is being challenged in court by Silver Bay Seafoods, a fishing company founded by a group of Sitka, Alaska commercial fishermen in 2007.

Silver Bay pioneered the business of gutting and beheading salmon in Alaska before freezing the carcasses and shipping them to China to be fileted and deboned. 

China quickly “developed into the largest export market for Alaska seafood,” according to the Alaska Seafood Marketing Institute (ASMI), ” because of the availability of processing infrastructure, low-cost labor, and low-cost international shipping.”

This was the biggest innovation in Alaska salmon processing in recent times, but it suffered when U.S.-China relations soured and tariffs were imposed. And it happened in the first place only because almost no one in the 49th state cares about the jobs of the nameless, faceless people who do the hands-on-work of processing fish in Alaska.

For the people who catch the salmon, it is a different story, and it is there that politics has for decades stood in the way of innovation.

A parallel

There is a parallel here with the collapse of the U.S. newspaper industry, a business that once made newspaper owners rich. In 2006 newspaper revenue peaked at nearly $60 billion per year, according to the data compiled by the Pew Research Center. 

This came after decades of publishers stuffing their pockets with cash.

“In the second half of the 20th century, (newspaper) coffers brimmed,” the NeimenLab’s Heidi Tworek and John Hamilton observed in 2018. “Newspapers had average annual returns of 12 percent; some enjoyed profits of 30 percent. During that same period, grocery store profits were in the 2 percent range and department stores around 4 percent.

“Owning a newspaper was basically a license to print money; news did not conform to the normal rules of business.”

Unfortunately for publishers, innovation that began early in the new millennium quickly changed the way news was delivered. The internet went mobile, and more and more, people began getting their news online rather than onpaper.

But that wasn’t all there was to the story. Thanks to craigslist.com, millions of people turned to the internet to sell things free online instead of buying “classified ads,” which had once been a gold mine for newspapers.

Major advertisers, who’d long supported newspapers by buying print ads, soon followed the little people using newspapers to push sales, and the industry went into a death spiral as revenues dried up and news consumers turned to free, online alternatives.

By 2020, Pew was reporting that newspaper ad revenue – which had accounted for about $50 billion of that $60 billion per year – was down to less than $10 billion, and newspapers were dying left and right.

Part of what happened to newspapers might be summed up by one quote from Microsoft cofounder Bill Gates: “Success is a lousy teacher; it seduces smart people into thinking they can’t lose.”

The newspaper business was once full of smart people. If you doubted it, they’d quickly set you right, and that attitude was a big impediment to innovation and adaptation. The failure to recognize what was happening and accept the need to cut the costs of news production to the bone – why do news organizations even need offices when everyone writing news can work from home? – continues to cause chaos in the business.

“The loss of local newspapers accelerated in 2023 to an average of 2.5 per week,” researchers at the Medill School of Journalism, Media, Integrated Marketing Communications at Northwestern University reported last year.

“Since 2005, the U.S. has lost nearly 2,900 newspapers,” those researchers said. “The nation is on pace to lose one-third of all its newspapers by the end of next year.”

The internet, it is fair to say, was a major disrupter in the news business. It provided a much cheaper way to circulate news and added more variety. Before the internet, there was no “mainstream news;” there was just the news.

And then….

“Those bloggers in their parents’ basement just talkin’ garbage,” as Alaska Gov. and failed vice-presidential candidate Sarah Palin put it in November 2008, led a charge that permanently altered the dynamic.

Within a year, Palin herself would be embracing some of those bloggers and the websites of alternative, digital-only news to blast what she took to calling “the lamestream media.” In the years that followed, she would use attacks on the “lamestream media” to boost herself into position as one of the country’s biggest polebrities while the lamestream struggled to find a way to survive.

It’s still struggling because, given the internet, anyone can now do news or infotainment or whatever you want to call the various forms of passing along information.

Farmed fish

Not everyone can do salmon, but thanks to a bunch of Norwegians and their innovations in the fish farming arena, a whole lot of people – Chileans, Brits, Aussies, Kiwis, Faroe Islands, U.S. Midwesterners and more – can now do salmon.

Admittedly, when the farmed fish revolution began, no one could see how fast the changes would come, but they were always on the horizon. The history of industrial agriculture as a food-production juggernaut could not be ignored by the end of the 20th Century.

The so-called “Green Revolution,” a decades-long, science-driven transformation of agriculture that involved innovation after innovation from disease-resistant crops to vastly improved fertilizers to genetically modified organisms and pesticides, had been underway since the 1940s, and by the 1980s – India and China – which had been facing threats of widespread starvation were feeding themselves. 

Given this history, it wasn’t hard to recognize that the rapidly evolving business of farming salmon was going to change the market for fish. The Alaska Legislature saw what was coming in 1989 when it banned net-pen salmon farming in the 49th state somehow thinking that would slow the growth of competition in the salmon market.

It didn’t, and Alaska salmon processors, which once owned the global market for salmon, went on doing what they’d always been doing in the belief that their “wild-caught” salmon were somehow “better” than farmed salmon even though the market was screaming otherwise.

A study published in the peer-reviewed journal of Marine Resource Economics in 2022 says about all that needs to be said here:

‘The world production of both farmed and wild-caught salmon…increased from about
500,000 tons in 1980 to approximately 3,600,000 tons in 2017. Over this period, the means of
salmon production has flipped from primarily wild capture (98 percent) in 1980 to majority farmed salmon aquaculture (75 percent) in 2017. Thus, while wild-capture fisheries have seen landings increase by roughly 84 percent, farmed salmon production has increased by 26,000 percent over the same time.”

This didn’t happen because consumers were forced to buy farmed salmon. It happened because consumers chose to buy farmed salmon and because most of that 84 percent increase in the landings of wild-caught salmon was Alaska pink salmon, which is not a preferred fresh or frozen product, but was something off which Alaska processors thought they could make money.

Their major response to the growing production of tasty, high-quality farmed salmon was to ask for an increase in the number of free-range, ocean-farmed pink salmon to increase production of a second-rate frozen salmon product or stuff into cans for sale as human or pet food with the latter sometimes more valuable than the former.

In 2010, the Pacific Seafood Processors – the same group now telling Alaska voters a requirement they pay for sick leave for their employees – approached the state and the private, non-profit, commercial-fishermen-controlled corporations running hatcheries the state had turned over to them with a request for a 60 percent increase in hatchery salmon production.

“From 2000-2009 the average statewide hatchery pink returns were 32.6 million in even years and 55.9 million in odd years – in both cases about 40 percent of total pink returns,” the processors said in an Open Letter to Alaska Hatcheries.

“We would like production to increase to 70 million in both even and odds years over the next five years, which would bring hatchery production to roughly 50 percent of that total.”

The group’s idea of Alaska’s salmon future was to produce huge volumes of low-value, relatively low-quality salmon at sea instead of trying to compete with the net-pen farmers in producing high-quality fish.

Early warning

Long before Knapp made his observations about the need to innovate and compete in the segment of the market where the real money is, others had warned against this strategy.

Way back in 2003, researchers from Stanford University published a paper in Marine Policy titled “Why farm salmon outcompete fishery salmon” wherein they made this observation:

“Faced with an economic crisis in Alaska, where salmon fishing is the state’s largest employer, the United States and Alaskan governments have applied band-aid subsidies in the form of ‘disaster relief’’ and large-scale government purchases of canned salmon.

“This approach – treating the symptoms of the problem rather than the causes – has proven ineffective, and the fishing industry’s problems continue to grow. The trend will likely continue until the legal landscape of the fishing industry, which has institutionalized a variety of inefficiencies, is significantly modified.”

More than 20 years on with the industry’s bleeding having now become a gushing wound pushing some salmon processors into receivership and leading the giant Japanese trading company Marubeni to abandon the state for better options, ever more band-aid subsidies are being used to try to maintain the industrial status quo with the Alaska Congressional delegation cheering it all on.

The observations of the Stanford researchers now seem amazingly prescient.

‘While farm production has increased, so too has the use of hatcheries in commercial fisheries. Hatcheries…are used in the lower 48 states and British Columbia with the aim of
aiding in the recovery of low or endangered wild populations.

“(But) in Alaska, Japan, and Russia, hatcheries are used for a different purpose, that is, to increase commercial fishery catches. The past 20 years have seen a sharp increase in the use of hatcheries for this purpose. In Alaska, for example, hatchery fish made up less than
2 percent of commercial landings in 1985. In 2002, hatchery fish accounted for more than 20 percent of Alaska’s commercial salmon landings.

“Prices for both farm and fishery salmon have fallen in line with the growth in salmon supplies fueled by farms and hatcheries. Prices of Atlantic farm salmon have dropped by 61 percent since 1989. From their 1984 -1992 average prices, prices of the five species of
salmon caught in Alaska’s commercial fisheries have dropped by 36 – 82 percent.”

This was an illustration of the old economic law of supply and demand at work. As supply grew to exceed demand, prices crept down. It is interesting that here, as in Knapp’s observations, the word “innovation” pops up again and again.

“…Farm salmon embodies several important innovations in salmon production,” the Stanford researchers wrote. “Some of these innovations cannot be matched by fishermen; however, current laws make innovation in fishing production more difficult than it should be.

“Existing salmon fishing laws were enacted in a world where the important competition in the salmon business was among groups of fishermen. While these laws harmed consumers by artificially raising prices, and injured certain sectors of the fishing industry by forcing
them out of the fisheries, they did create high employment and profitability within politically favored sectors.

“In the new context of competition with salmon farmers, these same fisheries laws have new, deleterious effects on all sectors of the fishing industry.”

They noted that even at this early date Knapp had begun to point out that “with globalization, markets will care more and more about consistency and predictability of production,” and that salmon farmers have “far greater control over the timing, consistency and quantity of production than do fishermen.”

This problem was significant in 2003. It would become only more so in the decades that followed as state management of Alaska salmon resources led to harvests yo-yoing ever more between even years and odd years. 

This season is proving a perfect case in point. After a 2023 season that ended with landings of 152.4 million pink salmon comprising 66 percent of the entire, all-salmon harvest, according to the Alaska Department of Fish and Game, the state is looking at a pink harvest of approximately 38.3 million pinks and a total, all-species harvest of only about two-thirds of the 2023 pink harvest alone amid indications that the up-down yo-yoing of pink salmon catches is now causing a similar yo-yoing in the harvest of other species.

The 2023 harvest of 51.8 million sockeye dropped to 41.3 million this year with harvests of chums, or what is marketed as “keta” salmon, falling from 23.5 million to 18.4 million; coho dropping from 2.3 million to 1.7 million; and Chinook, those big “kings” that are pound-for-pound the state’s most valuable fish, declining from 235,000 to 225,000.

Year-to-year comparisons are pretty much meaningless in the big picture given the wide fluctuations in wild salmon harvests from year to year, but the trend lines follow what is now being witnessed, and there is a growing body of evidence that the large production of hatchery fish – those ocean-farmed Alaska and Russian salmon – are fundamentally altering the North Pacific ecosystem.

And Alaska’s answer to this to date is not to change anything in how the salmon-fishing industry does business but to continue to support the failures with state and federal subsidies that have been going on for decades in various forms, including taxing the industry at such a low rate the taxes fail to even cover the costs of policing and managing the fishery and providing for relaxation of immigration laws to allow the industry to recruit most of its processing workforce from outside the U.S.

After an Alaska Seafood Marketing Institute (ASMI) “press” trip to Sand Point in 2010, Marion Nestle, the author of Food Politics wrote this:

“The men and women doing this work are mostly seasonal workers from the Philippines.  They work 12- to 16-hour days, six or seven days a week….We met people here who are trying to help the fishers get more money for their work.  We haven’t met anyone lobbying for higher wages for workers in the processing plant.

“The rationale?  Fish come in seasonally when they can be caught.  They have to be processed as soon as they come in.  If the workers were paid more, the wild fish would be so expensive that nobody could afford to buy them and everyone would turn to farmed salmon.”

When it comes to the workforce, little has changed. ASMI earlier this year portrayed the Alaska fishing industry as an “economic juggernaut,” but the data in its report painted a different picture of what was going on in the bowels of this juggernaut.

More than 80 percent of the 20,700 workers reported to be employed in processing came from outside of Alaska, about half of them from Latin America and Eastern Europe, and they earned an average of $26,425.12 – $885.12 above the $25,540 the federal government considers the “poverty level” for a couple living in Alaska.

There was some improvement this year. Brian Gannon, who works for a Washington, D.C. company that solicits foreign workers for fish processing plants in the U.S., in July told Bristol Bay’s KDLG radio that seafood companies raised processing worker pay to $18 per hour with $26 per hour for overtime pay, about double the pay of six or seven years ago.

That’s significantly higher than the state’s current minimum wage of $11.73, but about $2 per hour less than the $20 per hour that ZipRecruiter reports the average, seasonal employee of an Alaska cruise line earns, and working as a greeter, bus driver, baggage handler or any other job in the tourism business is a whole lot easier than any job in a fish processing plant.

This might explain why the college students who used to come to work in Alaska processing plants in the summer – Hillary Clinton once among them – now gravitate toward the tourism business. And why Gannon praised the Biden administration for this year increasing by 85 percent the number of visas available to foreign workers wanting to fill seafood processing jobs in the U.S.

“… It’s a classic beautiful case of a program being available by the government that actually serves the American employer and helps the greater industry,” he told the Bristol Bay public radio station.

“Our mantra for that is to ‘work, earn and return.’ Come in, work, and go home. And our people enjoy that. You know, and we have a large group of people that want to come in; they want to work; and they want to return to their home countries.”