H2-A SHEEPHERDERS

COMPENSATION

METHODOLOY October 9, 2014

Julie Stepanek Shiflett, PhD Juniper Economic Consulting, Inc. julie@juniperconsulting.org Mountain Plains Agricultural Service info@mpaswy.com Western Range Association http://westernrange.org/blog/ American Sheep Industry Association www.sheepusa.org

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Abstract

The sheep industry proposes a new sheepherder compensation methodology with annual updating mechanism. Mountain Plains Agricultural Service, Western Range Association and the American Sheep Industry Association (H2A Committee) convened to develop a new sheepherder wage compensation formula. At issue is a dissatisfaction with how sheepherder wages are determined. Specifically, the dependence upon an antiquated wage survey and the lack of an updating mechanism. The proposed herder compensation starts with a national base wage –calculated one time, using the federal minimum wage – and deducts the value of board which is defined as the U.S. Department of Agriculture (USDA) Liberal Food Plan. The liberal food plan was chosen as it reflects a diet of herders: a mature male with a high-protein diet. It is also most in line with findings from a 2010 Colorado Wool Growers Association survey of sheep ranchers. The resulting herder compensation is the federal minimum wage less the USDA-reported cost of meals and includes the provision of room. Any state wage rate established through an overruling state wage methodology shall not be subject to the base wage rate increases defined in these special procedures. The herder compensation calculation is two-tiered. First, the federal minimum wage of $7.25 per hour multiplied by 173.33 hours per month yields a base wage of $1256.64 per month. Second, the provision of meals is based upon the USDA Food Plan cost which is $447.72 per month on August 2014. The difference is the herder compensation: $808.92 per month. Following this one time conversion to a national base wage, herder compensation will adjust to market conditions based upon two mechanisms. The industry first proposes to adjust the base wage in accordance to changes in the Bureau of Labor Employment Cost Index (ECI) with a 2-percent cap. Second, the value of meals is also adjusted annually, based upon changes in the USDA Liberal Food Plan cost of meals. The industry also proposes to ensure that herder compensation is not adversely affected in the annual adjustment and therefore recommends regulation against negative adjustments. I.e. if the ECI adjustment is less than the Food Plan cost adjustment, the wage would not adjust.

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Table of Contents

Calculating Herder Compensation .................................................................................................. 4

Background .................................................................................................................................. 4

Establishing a Sheepherder Base Wage ...................................................................................... 5

Board Deduction ......................................................................................................................... 5

The Oregon Case ...................................................................................................................... 5

USDA Food Plans Board Deduction ............................................................................................. 6

Annual Herder Compensation Adjustments ................................................................................... 8

Conclusion ..................................................................................................................................... 10

References .................................................................................................................................... 11

Appendix A – Real Wage Cost Estimate to Sheep Ranchers ......................................................... 12

List of Tables and Figures Table 1 USDA Food Plan Costs ....................................................................................................... 7

Table 2 Proposed Herder Compensation with USDA Food Plan Deduction .................................. 8

Figure 1 Annual Percent Change in ECI……………………………………………………………………………..……....9

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Calculating Herder Compensation The sheep industry is afforded an opportunity to provide recommendations to the process of defining a new herder wage methodology that sets wages and necessary annual adjustments. This charge is a privilege and a burden, for the options are many. After deliberating a multitude of alternatives, the industry has come to a consensus. The resulting wage determination methodology is transparent, tied to federally-reported indices and easy to understand and update.

Background

In the Department of Labor, June 14, 2011 “Attachment A: Special Procedures: Labor Certification Process for Applications for Sheepherding and Goatherding Occupations under the H-2A Program,” special provisions were established. In establishing the prevailing wage rate for sheepherding and/or goatherding, the Department used findings from prevailing wage surveys conducted by SESAs in accordance with the procedures in the ETA Handbook No. 385, and consistent with the wage setting procedures historically applied to sheepherder occupations in the Western states. At issue in this note is that the use of prevailing wage surveys is no longer appropriate in defining H2-A sheepherder wages due to declining number of sheepherders and the inability for prevailing wage surveys to meet sample size thresholds. The resulting concern is that sheepherder wages are stagnant, for there is not a valid updating mechanism. It therefore became quickly apparent that herder wages determination must be revisited. At the crux of a new wage discussion for H2-A sheepherders is that sheep herding requirements are unique as are the costs that sheepherder employers face. It is therefore justified that H2-A sheepherder compensation can be uniquely determined. Sheep ranchers face costs that other agricultural employers hiring H2-A workers do not face. The sheep rancher must incur transport costs to hire workers with unique talents from countries as far away as Peru. Second, the sheep rancher must incur the costs to transport food to often distant and remote areas where herders work and live. The sheep rancher must also maintain housing in remote areas of our country, also incurring a significant transport cost. Employer room and board compensation are two additional factors that are up for discussion in this period of flux. Historically, and by law, the employer provides room and board free of charge. From the special procedures: “The employer must state in its job order that sufficient housing will be provided at no cost to H-2A workers. In addition, “based on long standing practice in the industry, the employer must provide its U.S. and H-2A workers free of charge either three prepared meals a day, when workers are in camp, or free and convenient cooking facilities and provision of food for the workers to prepare their own meals while in camp or on the range.”

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The herder wage established in a court settlement in 1994 in Oregon provides legal precedence for deducting board – not room -- in calculating herder wages. It is thus proposed in this note that only board, not room, be deducted in the herder compensation calculation. Deducting the cost of meals is also justified due to precedence established in other industries. Many other unique occupations such as cruise lines workers, tipped employees or a dormitory manager can receive a base pay that is lower than the federal minimum wage established in the Fair Labor Standards Act. While the actual pay is lower than the federal minimum wage, the benefit of tips or room and/or board bring the real wage value up the federal minimum wage. This note will outline how herder compensation will be determined. First, a base wage is determined. Second, the value of meals will be deducted. Lastly, the base wage less the value of meals yields the proposed sheepherder compensation. This report will also propose how the herder wage compensation will be updated annually to keep in line with market conditions.

Establishing a Sheepherder Base Wage

One national sheepherder wage is proposed using the federal minimum wage of $7.25 per hour in 2014. At 173.33 hours per month, this equates to a $1,256.64 per month base wage. This one base wage accurately reflects compensation for herders across state lines doing similar work.

Board Deduction

In establishing a new wage determination, the sheep industry can deduct meal expenses currently borne by sheep ranchers. There is legal precedence from Oregon to deduct meals in calculating herder compensation. Room, however, will not be deducted. The industry has historically provided herder’s room at no cost to the herder. Further, there is no legal precedence to deduct the value of room from herder wages.

The Oregon Case

There is already legal precedence for deducting board from the herder wage determination. Most western states utilize the prevailing wage survey to define H2-A sheepherder wages with the exception of Oregon. In Oregon, the break came out of a lawsuit in the early-1990s. In Oregon the sheepherder H2-A wage was determined by a court settlement.1 In 1994, Western Range Association (and its members) and plaintiff Arturo Zapata (represented by Oregon Legal Services Corp) settled an employment contract that established a minimum sheepherder wage. At the time, the salary increase to $650 per month was retroactive to October 1, 1992. Current revisions to the established base wage rate are tied to changes in Oregon’s minimum wage.

1 Prior to July 2011, the Oregon sheepherder wage was $1,211.55 after board was deducted. New wages established in July 2011, Oregon’s wage rate was set to $1227.67 plus room and board.

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Not only was the herder wage tied to the state minimum wage in Oregon, but the number of hours was established in the settlement as was a credit for board. It was found in the settlement that herders work 40 hours per week for 52 weeks per year for a total of 2,080 hours per year. This calculates to 173.33 hours per month.

USDA Food Plans Board Deduction

The sheep industry presents a base wage rate equal to the 2014 federal minimum wage rate, but proposes to deduct the value of rancher-provided grocery costs supplied to herders in calculating the final herder compensation. It is proposed that the value of herder meals be based upon the U.S. Department of Agriculture (USDA) “Food Plans: Cost of Food” which offers a competitive meal cost. The Center for Nutrition Policy and Promotion (CNPP) of the USDA uses the USDA’s Food Plans and current food cost data to calculate, each month, the Cost of Food at Home for four different cost levels. The Thrifty, Low-Cost, Moderate-Cost, and Liberal Food Plans each represent a nutritious diet at a different cost. According to USDA, the nutritional bases of the Food Plans are the 1997-2005 Dietary Reference Intakes, 2005 Dietary Guidelines for Americans, and 2005 MyPyramid food intake recommendations. In addition to cost, differences among plans are in specific foods and quantities of foods. All four Food Plans are based on 2001-02 data and updated to current dollars by using the Consumer Price Index for specific food items. Each plan provides enough food for all meals to be eaten at home or carried out of the home. The thrifty plan, which is the least costly of the four, is the basis for the Supplemental Nutrition Assistance Program (SNAP) allotments, formerly the Food Stamp program. The low and moderate programs provide appropriate diets with increasing quantities. The liberal plan permits a greater variety of foods: more meat and a different mix of fruits and vegetables than the other plans. In July 2014 a thrifty meal plan per person per month was $187.70, $242.00 per person for a low-cost option, $303.70 per person for a moderate-cost plan and $373.10 per person for a liberal meal plan. The costs given are for individuals in 4-person families. For individuals in other size families, the following adjustments are suggested by USDA: 1-person—add 20 percent; 2-person—add 10 percent; 3-person—add 5 percent; 4-person—no adjustment; 5- or 6-person—subtract 5 percent; 7- (or more) person—subtract 10 percent. Table 1 outlines the different USDA meal plan costs.

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Table 1 USDA Food Plan Costs

Thrifty Low Moderate Liberal

Base Monthly Cost: 4-Person Household, Male, 19-50 Years

$187.70

$242.00

$303.70

$373.10

Added 20% for Individual Cost

$225.24

$290.40

$364.44

$447.72

It is recommended that the Liberal plan be adopted in calculating herder compensation because it most closely reflects the diet of sheepherders: a mature male with a large share of meat in the diet. For a 19- to 50-year old male herder the estimated monthly food budget for a liberal-cost plan is 20 percent more than $373.10 per month, or $447.72. The Liberal meal plan is also justified because it is the one plan that most closely matches the cost of meals in the 2010 Colorado Wool Growers Association survey of sheep ranchers. In 2010 Colorado Wool Growers commissioned a study to estimate the real wage benefit afforded sheepherders. Its finding on the valuation of board helps validate the use of the USDA Food Plan cost. According to the study, total economic costs of hiring a herder included direct wages, but also room and board, airfare and domestic transportation. Survey results of sheep ranchers revealed that ranchers spent an average $382 per month on groceries per herder in 2010 (Appendix A). The Wool Growers’ study found:

“The provision of abundant, high-quality food is critical to the performance and well-being of the herder and is a significant component of the real wage received by herders. One rancher explained, “A well-fed man takes care of our property as it was his own.” Ranchers explained that they are willing to accommodate a herder’s food preferences. A grocery list will include meat from the ranch (often lamb, beef and pork), but also purchased chicken and canned tuna. A rancher reported that his herders love chicken. He buys chicken by the caseload. The herders also enjoy fresh fruits and vegetables, fresh milk, beans, canned and fresh tomatoes as well as cookies and crackers. Personal items purchased at the grocery store such as razors, stamps and phone cards are often deducted from herder wages.”

In 2014 dollars the $382 per month in groceries translates to $414 per month using the all items Consumer Price Index (CPI) reported by the Bureau of Labor Statistics. This finding helps validate

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use of the USDA Food Plan cost. Table 2 delineates the resulting herder compensation calculated after the Liberal USDA Food Plan cost is deducted. The resulting herder compensation utilizing the USDA Food Plan cost is $808.92. Table 2 Proposed Herder Compensation with USDA Food Plan Deduction

A. Base Rate per Hour

(Federal minimum wage) B. Monthly Wage (@

173.33 hours per mo.) C. USDA Meal

Plan Deduction

Option 1. Herder Compensation (Column B -C)

National $7.25 1,256.64 $447.72 $808.92

Annual Herder Compensation Adjustments

It is proposed that the recommended herder compensation will adjust annually by two mechanism to accurately reflect market conditions. First, the committee recommended that changes in the base wage adjust with the Employment Cost Index (ECI) with a 2 percent maximum. Second, the cost of meals deducted will adjust with the USDA Food Plans Liberal cost. The ECI represents the cost of labor. It is a quarterly index published by the U.S. Department of Labor, Bureau of Labor Statistics (BLS), which measures changes in employee compensation, or the cost of labor. The index is based on a survey of employer payrolls in the final month of each quarter. Importantly, it controls for changes in the industrial-occupational composition of jobs. That is, the index will not fall due to an employment shift to lower-paying occupations. The ECI differs from simply tracking wages because it calculates the total set of employee costs to businesses, not just wages. It includes the cost of fringe benefits, health insurance, pensions and death-benefit plans and bonuses. The ECI defines labor cost for the civilian labor force, private industry and state and local government. The civilian labor forces describes the subset of Americans who have jobs or are seeking a job, are at least 16 years old, are not serving in the military and are not institutionalized. All non-farm industries are covered, with the exception of federal government employees (which only make up 2-3% of the work force). In summary: the index captures all Americans who are eligible to work in the everyday U.S. economy. The herder compensation updates will utilize the civilian labor force index across all occupations. Tying agricultural wages to the ECI has been widely supported by agricultural worker groups for it was proposed and passed in the immigration Senate Bill 744 Border Security, Economic Opportunity, and Immigration Modernization Act on June 27, 2013.

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It is proposed that restrictions be placed on year-to-year herder compensation increases. The sheep industry is a volatile industry exhibited by recent sharp swings in feeder and slaughter lamb prices. Unnecessarily volatile input costs such as in herder wages would only add risk (and thus costs) to an industry that has been contracting over the last few decades. As reviewed, the committee recommends tying changes to the base wage to changes in the ECI, but with a cap of 2 percent.2 If the base wage adjustment cap is adopted then the rule would have gone into effect in 5 out of the past 10 years. Where the ECI growth is higher than 2 percent, the base wage increase will be topped at 2 percent. Herder wages will adjust annually with the implementation of the wage adjustment beginning on January 1, 2015 utilizing the ECI report from the third quarter of 2014.

In a two-pronged adjustment mechanism, it is also recommended that the boarding calculation is updated annually. The cost of providing meals to herders can vary considerably year-to-year and that cost doesn’t necessarily trend with the ECI. Not only does the ranchers’ grocery bills fluctuate, but the opportunity cost of the meat provide herders varies. Sheep ranchers provide their herders meat from their ranch. The value of that lamb, beef or pork could receive a premium over commodity values in the marketplace. The beef or pork sheep ranchers provide is often all-natural or, in the case of beef, grass-fed. Further, lamb is a premium protein. It is proposed that boarding compensation adjusts annually with the Liberal USDA Food Plan cost. The Food Plan is released monthly and is adjusted based upon the Consumer Price Index (CPI). In the event that the annual adjustment in meal costs exceeds the increase in the base wage rate,

2 The immigration Senate bill 744 Border Security, Economic Opportunity, and Immigration Modernization Act that

passed the Senate on June 27, 2013 included language that introduced limits to agricultural worker wage adjustments. The wage adjustment language has passed the Senate and has been approved by various influential farmer groups.

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Per

cen

t

Figure 1 Annual Percent Change in ECI Source: Derived from BLS.

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the current herder compensation will remain unchanged. That is, in any year there will never be a reduction in herder compensation, only increases when the adjustment mechanisms require.

Conclusion

This note proposes a new sheepherder wage methodology. It provides for a feasible, workable option to update the base wage with a one-time calculation based upon the federal minimum wage rate and deduction for meals. Precedence for this wage methodology is already established in Oregon in 1994. The industry also recommends a two-tier updating mechanism that ensures that herder wages are kept up to date with market conditions. As its base, it is proposed that a new, national, herder wage be determined using the federal minimum wage. Second, the value of meals provided herders will be deducted from the base wage based upon the Liberal USDA Food Plan cost of meals at home. The base wage rate less the meals deduction yields the herder compensation. Each year the herder compensation will be updated. The base wage rate will be tied to changes in the Employment Cost Index (ECI) with a 2-percent cap. The board deduction will also change each year based upon changes in the USDA Liberal Food Plan cost. It is further recommended that the updating mechanism should not have an adverse effect on herder compensation in any year.

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References “Border Security, Economic Opportunity, and Immigration Modernization Act,’’ June 27, 2013, S.744.ES.

Colorado Wool Growers Association. March 2010. “The Real Wage Benefits Provided To H-2A Sheep Herders and the Economic Cost to Colorado Ranchers.” Prepared by Julie Stepanek Shiflett. U.S. Department of Agriculture, September 2014. “USDA Food Plans: Cost of Food,” Accessed at http://www.cnpp.usda.gov/USDAFoodPlansCostofFood/reports on 9/22/14. U.S. Department of Labor, June 14, 2011. “Attachment A: Special Procedures: Labor Certification Process for Applications for Sheepherding and Goatherding Occupations under the H-2A Program.” U.S. Department of Labor, Bureau of Labor Statistics. Employment Cost Index. Accessed at http://www.bls.gov/news.release/eci.toc.htm on September 22, 2014. U.S. Department of Labor, Bureau of Labor Statistics, “Frequently Asked Questions (FAQs), Question: Is the Consumer Price Index (CPI) a cost-of-living index? Accessed at http://www.bls.gov/dolfaq/bls_ques2.htm on October 1, 2014. U.S. Department of Labor, Bureau of Labor Statistics, “National Compensation Survey - Employment Cost Trends,” Accessed at http://www.bls.gov/ect/ on October 1, 2014. U.S. Department of Labor, Employment and Training Administration, June 14, 2011, “Advisory: Training and Employment Guidance Letter No. 32-10.” U.S. Department of Labor, Employment and Training Administration, “Labor Certification Process for the Temporary Employment of Aliens in Agriculture in the United States: 2014 Allowable Charges for Agricultural Workers’ Meals and Travel Subsistence Reimbursement, Including Lodging,” Federal Register / Vol. 79, No. 43 / Wednesday, March 5, 2014 / Notices. U.S. Department of Labor, Wage and Hour Division, Division of Communications Accessed at http://www.dol.gov/dol/topic/wages/minimumwage.htm on September 22, 2014. U.S. Department of Labor, Wage and Hour Division, Division of Communications, Accessed at http://www.dol.gov/whd/minwage/america.htm#Consolidated on October 1, 2014. U.S. Department of Labor, Wage and Hour Division (WHD), “Minimum Wages for Tipped Employees,” Accessed at http://www.dol.gov/whd/state/tipped.htm on September 23, 2014. U.S. Department of Labor, Wage and Hour Division (WHD), July 2009. “Fact Sheet #2: Restaurants and Fast Food Establishments under the Fair Labor Standards Act (FLSA)”

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Appendix A – Real Wage Cost Estimate to Sheep Ranchers

The following excerpt is from the 2010 Colorado Wool Growers’ “The Real Wage Benefits Provided To H-2A Sheep Herders and the Economic Cost to Colorado Ranchers.”

The actual pay received by H-2A herders doesn’t accurately capture the real wage benefits provided to herders such as free room and board. A real wage calculation captures the value of all goods and services provided to herders during their employment. A real wage captures opportunity cost. That is: ‘What would it cost if a herder had to pay his own food, housing or clothing expenses?’ These values are added onto the herder base pay to calculate his real wage. Herders also do not pay for transport, but this will be factored into the real expenses paid by ranchers, not into the real wage calculation for herders. Unlike the employers of H-2A farm workers, employers of H-2A sheep herders must pay for food; and transportation costs that are much higher than for H-2A farm workers. The ranchers pay the herders a federally established wage of $750 per month. However, the inclusion of additional benefits including food and housing, yield an estimated real wage of $1,638 per month or $10.24 per hour. In calculating the real wage paid to herders, a budget was outlined representing typical expenses and receipts afforded herders as presented by ranchers surveyed (Table 2).

Table 2. Calculation of Real Wages for Colorado H-2A Sheep Herders

Real Wage Paid to Herder Herder Real Wage

(Per month)

Herder Real Wage (Per hour @ 160

hours/month)

1. Base pay $750 $4.69 2. Food $382 $2.39 3. Housing -- Rental $288 $1.80 4. Housing -- Maintenance and Utilities $137 $0.86 5. Clothing and Tools $27 $0.17 6. Doctor fees $23 $0.14 7. Cashed in paid vacation (2 weeks per year) $31 $0.20

Real Wage Paid to Herder $1,638 $10.24

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Meals Valuation The Colorado Wool Growers’ Association rancher survey asked ranchers how much they spend on groceries for their herders.

Ranchers spent an average $382 per month on groceries per herder on 2010. Per regulations, a rancher employing an H-2A herder must provide food. Ranchers shop on behalf of herders and deliver food and supplies at least twice weekly. The provision of abundant, high-quality food is critical to the performance and well-being of the herder and is a significant component of the real wage received by herders. One rancher explained, “A well-fed man takes care of our property as it was his own.” Ranchers explained that they are willing to accommodate a herder’s food preferences. A grocery list will include meat from the ranch (often lamb, beef and pork), but also purchased chicken and canned tuna. A rancher reported that his herders love chicken. He buys chicken by the caseload. The herders also enjoy fresh fruits and vegetables, fresh milk, beans, canned and fresh tomatoes as well as cookies and crackers. Purchasing groceries is an expense that the herder does not have to pay. By contrast, it is an expense that both the H-2A farm worker and minimum wage town worker must incur. Personal items purchased at the grocery store such as razors, stamps and phone cards are often deducted from herder wages.

Housing Valuation

The conservative estimate for the monthly value of sheep camp housing is $288, which is less than $10 per day. The $288 per month is based upon sheep rancher sheep wagon payment rates and a survey of rental rates for hunting cabins in the wilderness. However, there are additional costs including maintenance. Survey results revealed that ranchers pay an additional $137 per month for camp maintenance, heating, and water. The total cost to the rancher to provide housing is thus $425 per month. The special provisions created for employers of H-2A sheep herders require that housing be provided to the herders as a component of the contract. Housing receipts provided to the herders enter the real wage calculation in two ways. First, a rental rate can be computed to assess the value of the sheep camp. Second, annual maintenance of sheep camps and bunk houses, in addition to the provision of fuel and water, is a cost to the rancher, which is also to the herder’s benefit. The housing provided herders can be variable, but all housing is typically hard-sided, on wheels, sleeps one comfortably, uses a wood stove or propane for heat, cooking and washing.

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The interior of the sheep wagon is similar to a compact RV. There's a bed, folding tables, and built in seats with storage space underneath. A newer sheep wagon will have solar panels to provide indoor hot water, heat, air conditioning and electricity. Department of Labor requires that State Workforce Agencies (SWAs) use the detailed housing regulations to conduct inspections of fixed-site and mobile housing units at least once every three years.3 Additionally, the rancher must sign a statement at the time of application that herder housing meets the standards outlined in the regulations. Whether it’s a condo or a sheep camp, living accommodations cost money; expenditures include both the initial purchase price and maintenance. In order to assign a fair value to sheep camp housing provided to herders, two different approaches were utilized: 1) the break even cost over a 10-year period; and 2) a conservative rental rate value. The breakeven cost is the estimated lower boundary for the sheep wagon rental rate. It is the minimum that the rancher should accept for use of the wagon. It is the depreciation expense, which is that portion of the total cost of a business’s fixed asset that is allocated to a given period, such as a month, for using that asset during the period. Using an average purchase price of $15,000 for a sheep camp, as provided by surveyed ranchers, and a break even value over a 10 year period, the monthly housing cost is $125 per month. The second method to determine the value of housing provided to herders is to estimate the potential rental rate of a sheep wagon. This serves as the upper boundary for the estimated rental rate. Outdoors enthusiasts (hunters, hikers, fishermen, etc.) routinely rent very simple living quarters. The value recreationists place on a rustic cabin or trailer assist with establishing a rental rate for a sheep wagon. Nearly one-half of ranchers surveyed live in the tri-county area in northwestern Colorado – Moffat, Routt and Rio Blanco Counties. Availability of hunting cabins or cabins for backpackers is limited. Rustic cabins in National Forests can run from $50 to $75 per night (up to $2,250 per month).4 Very rustic cabins at the Wilderness Ranch, about 50 miles northeast of Craig (in Moffat County) bordering the Routt National Forest, rent for about $600 per month.5 The cabins do not have electricity or running water, but are larger than a sheep wagon.

3 Department of Labor, Employment and Training Administration. “Special Procedures for Processing H-2A

Applications for Occupations Involved in the Open Range Production of Livestock,” February 9, 2007. 4 U.S. Forest Service. Cabin and Lookout Rentals – Colorado. Accessed at

http://www.fs.fed.us/r2/recreation/rentals/#co_cabins in February 2010. 5 Country Living Realty, LLC. Craig, Colorado. Phone conversation with Broker Associate Marylou Wisdom

February 13, 2010

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Two real estate agents were contacted in the Craig area to estimate the rental rate of a very

rustic, isolated, one person, no-amenity cabin or trailer.6 The realtors reported rent could range between $350 and $450 per month.

The rental market for a rustic cabin or trailer in the wilderness with no amenities is thin. This means that if a landlord wanted to find a renter, he or she would most likely have to significantly lower the rent. In order to provide a conservative value for sheep camp housing, the median value between $125 (break even cost) and $450 (rental estimate) of $288 per month, was chosen as a representative rental rate for an average sheep wagon (less than $10 per day).

In addition to free rent, herders benefit from the annual expense (incurred by ranchers) of equipping the sheep camp, providing propane and wood and general maintenance. Every year, ranchers likely revamp at least one of multiple sheep camps. This includes changing or fixing tires,

providing new paint, flooring and upholstery. Additionally, stove pipes need replacing about every 3 years. One rancher spent $1,200 to provide additional insulation for his sheep camps. Per regulations, the rancher will also provide a new first aid kit annually as well as a new or recharged fire extinguisher.

Ranchers typically cut wood for the herders to use for heat and cooking. Additionally, many ranchers provide propane, which can cost $25 per month. Ranchers also often provide Coleman fuel for lanterns in addition to batteries.

One hundred percent of the ranchers surveyed provided information on camp maintenance, and the average monthly expenditure for sheep camp maintenance and fuel is $137. This is a housing expense that a herder doesn’t have to pay and is counted toward the herder’s real wage.

The total housing benefit to herders is therefore $425 per month – sum of rent, maintenance and utilities.

6 Country Living Realty, LLC. Craig, Colorado. Phone conversation February 13, 2010. American Northwest

Realty. Craig, Colorado. Phone conversation with Broker Roy McAnally on Feb. 13, 2010. By comparison,

a one-bedroom home for rent in Craig goes for about $650/mo. to $850/mo. in Feb. 2010.