The Farm Labor Problem Introduction The Farm Labor

The Farm Labor Problem Introduction

The Farm Labor Problem The fight is never about grapes or lettuce. It is always about people. ― Cesar Chavez • Why study agricultural labor? Why not just labor economics? • Because agriculture and agricultural labor are different

Why Agriculture Is Different: The Problem of Farm Labor Demand • The agricultural production function has nature (ε) as an input:

Initial labor demand (w 0, p 0, ε 0) w, MVPL w 0 LS 0 A LD 0 p. MPL(L, K, ε 0) Labor

Other Differences • Risk • The importance of insurance • Timing and Seasonality • Sequential production • The importance of credit • Space: Land is an input, so agriculture’s spread out • How to get workers out to the right places at just the right time? • Inequality and concentration • Producer and consumer in same unit • Who wants to pick crops for a living?

Who works in agriculture? • U. S. ag used to be a scattering of small family farms • The Jeffersonian ideal • Often poor access to substitutes for family labor • The family’s preferences for leisure and consumption determined how many hours they worked • …and how much the farm produced Grant Wood American, 1891 -1942 American Gothic, 1930

The Transition Away from the Agricultural Household (Chapter 5) • Household-farms are uncommon in the U. S. today • Agriculture is not a way of life. It’s a business • Less than 2 percent of the U. S. population works in agriculture • Most U. S. farms hire labor (some hire a lot!) • Farmers are profit-maximizers • Production and consumption are separable • Farmers hire workers to maximize profits regardless of the family’s preferences for leisure or consumption • Agricultural households are still common at the global level • But less so all the time • How does the transition away from agricultural households happen?

The Problem of Farm Labor Supply • As economies grow and become richer, people don’t want to work on farms

Rich Societies Want to Help Farmworkers— but this Makes the Farm Labor Problem Worse • Welfare and unemployment insurance create a lower bound on the reservation wage. • Farm labor markets adjust to demand shocks via changes in the demand for welfare and unemployment insurance • …rather than through an endogenous wage adjustment that redistributes domestic farm workers across regions.

Immigration Fills the Gap (for Now…Chapter 6) • In 2006, only 23% of all U. S. farm workers (2% in California) were U. S. -born • The rest were immigrants, earning wages that were easily eight times the minimum rural wage in the rural areas of Mexico from which most come • Most were unauthorized (Ch. 7), almost none were unionized (Ch. 8) • The marginal value product of labor in Mexico is the opportunity cost of migrating to U. S. farm jobs The farm workers of tomorrow are growing up outside the United States. - Philip L. Martin

A Vicious Circle of Poverty & Farm Employment Farm Jobs Stimulate Immigration A Farm Employment B Immigration

Tthe Availability of Immigrant Workers Stimulates the Creation of New Farm Jobs A Farm Employment B Immigration

Low Farm Worker Earnings Lead to Rising Poverty and Welfare Use in Rural Communities C Poverty A Farm Employment B Immigration D Welfare Use Adapted from P. L. Martin and J. E. Taylor. 1998. “Poverty Amid Prosperity: Farm Employment, Immigration, and Poverty in California. ” American Journal of Agricultural Economics. 80(5): 10081014.

Rising Farm Employment Has Meant More Poverty in Rural Areas Source: Econometric Analysis of 2000 Census Data on 66 Rural California Communities Studied in Taylor, Martin and Fix (1997), Poverty Amid Prosperity: Immigration and the Changing Face of Rural California. Washington DC: Urban Institute Press.

Equilibrium in Farm Labor Markets: Both Spatial and Temporal (Chapter 4) • Farms in one region may be able to lure workers by offering them higher wages • …but the effects reverberate into other regions. • This produces the familiar pattern of localized seasonal farm labor shortages • …Even in a context of overall labor abundance.

What’s a Farm Labor Shortage?

Initial labor demand (w 0, p 0, ε 0) w, MVPL w 0 LS 0 A LD 0 p. MPL(L, K, ε 0) Labor

Labor demand after negative labor supply shock (w 2, p 0, ε 0) w, MVPL w 2 LS 0 C A w 0 LD 0 Farm labor “shortage” p. MPL(L, K, ε 0) Labor

A Coordination Problem? • Can there be a labor shortage even when there is an abundant farm labor supply? • (Answer: Yes!) • It’s all about time and space

How a Late Harvest in Sacramento County Made Pears Rot in Lake County With fewer workers, Mr. Bautista fell behind in harvests near Sacramento and arrived weeks late in Lake County. “There was a lot of pressure on the contractors, ” he said. “But there is only so much we can do. There wasn’t enough labor. ”

Production Uncertainties Compound the Problem • How many workers will be needed for the harvest? • It depends…

Initial labor demand (w 0, p 0, ε 0) w, MVPL w 0 LS 0 A LD 0 p. MPL(L, K, ε 0) Labor

Labor demand after positive weather shock (w 0, p 0, ε 1) w, MVPL LS 0 w 1? ? w 0 A B ? p. MPL(L, K, ε 1) Farm labor “shortage” Labor

Labor demand after negative weather shock (w 2, p 0, ε 0) w, MVPL LS 0 C w 0 A ? ? Unemployed Farm Labor

The Elephant in the Room (Ch. 9)

The End of Farm Labor Abundance Downward Trends in Farm Labor Supply in All Regions of Mexico Source: Diane E. Charlton and J. Edward Taylor, “A Declining Farm Workforce: Analysis of Panel Data from Rural Mexico. ” UC Davis, Department of Agricultural and Resource Economics, March 2015. 26

Higher U. S. Farm Wages CPI Change: 3. 45% Source: USDA, National Agricultural Statistics Service (NASS). 27

…And things are changing in Mexico too

Responses (Ch. 10) • Fewer workers • Rising wages • What’s a farmer to do? • Switch to less labor-intensive crops? • Manage a smaller workforce more efficiently?

Or put robots in the fields? UCD engineering is working on this!