Do Food Industry Mergers and Acquisitions Affect
Wages and Employment?
Michael
Ollinger
Headlines announcing a major merger
or acquisition are often followed by an opening
paragraph outlining planned job cuts, plant closings,
and possible cuts in salaries and wages. The merger
or acquisition is often blamed for the cuts and
closings, but other structural changes come into
play.
The late 1970s and 1980s were
times of major mergers and acquisitions in the food
industry. In beef packing, Conagra acquired Monfort,
and Cargill bought the operations of MBPXL and Spencer
Beef, renaming them EXCEL. In fluid milk processing,
Borden bought Meadowgold in 1987 before Borden itself
exited the industry. During this time period, eight
food industries—meat packing, meat processing,
cheese making, fluid milk processing, flour milling,
corn milling, and feed and soybean processing—underwent
structural transformation. The number of plants
declined by about one-third, the number of employees
dropped 20 percent (more than 100,000 workers),
and wages stagnated. Poultry slaughtering and processing,
by contrast, added workers, mainly due to a shift
from producing whole roasters to more labor-intensive
boneless and processed products.
Untangling the causes of structural
change and its effect on wages and employment is
difficult. Many economic forces underlie decisions
to shut down plants and purchase others, most importantly,
changes in demand and technology. For example, technological
change has led to larger beef packing plants. At
the same time, declining beef consumption has lowered
production across the industry. Larger plants and
declining production lead to a reduction in the
number of plants, a need for fewer workers, and
downward pressure on wages. Such “shrinking”
pains are often accompanied by a wave of mergers.
ERS and the Census Bureau used
statistical techniques to isolate the effects of
mergers and acquisitions on wages and employment
during two merger waves. The research found that
mergers and acquisitions were no more likely to
lead to job cuts than other causes of restructuring.
After controlling for plant size, capital investment,
initial wage levels, and other plant characteristics,
analyses of Census of Manufacturers data show that
mergers and acquisitions had a positive effect on
employment in six of the nine industries during
the first study period (1977-87), but no effect
during the second study period (1982-92). Mergers
and acquisitions had a positive, but small, effect
on wages in seven of the nine food industries in
the first study period, and no discernible effect
in the second study period.
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