If you manage your family’s dairy farm, you probably already realize you earn a lower salary than the hired farm manager down the road, but you may not know what the gap is.
According to an agricultural economist at Cornell University in New York, family members who manage their family’s dairy operations earn about 30% less—a difference of $22,000 a year—than hired farm managers, based on analysis of dairy farm income from 1999 to 2008.
That means that while a hired dairy farm manager in New York State might have earned a median salary of almost $75,000 in 2005, a family member would have earned just $53,000.
There’s also the “socioemotional benefit,” according to researcher Loren Tauer, a professor in the Dyson School of Applied Economics and Management at Cornell. “Family members like to work for the family farm, as it brings prestige and satisfaction by working with siblings, cousins and parents,” Tauer said. “The socioemotional part is that these family members feel an attachment to the dairy farm.”
That level of tradeoff troubles Polly Dobbs, an Indiana lawyer who specializes in farm succession planning and family business issues. "My position is that you ought to pay family members the same amount that you'd have to pay a stranger," she says. "That's how you attract the next generation back to the farm."
What about the fact that these family members have been promised the chance to either inherit or purchase the farm in the future? "That's great, if the promises are ironclad, in writing and properly communicated to all parties, and not just verbal promises," says Dobbs, who works with Farm Journal's Legacy Project.
She advises producers who want their family’s farm to survive and thrive to make room for their sons and daughters financially and operationally. According to Dobbs, that transition should include shared decision-making, fair pay and the chance for the next generation to build equity along the way--not just wait in the wings until when they inherit the farm "someday."
Do you think it's fair for hired farm managers to make 30% more than family members who are farm managers? Why or why not? Let us know in the comments.