The Market for Pickers and Packers:
The market for agricultural labor isn't really different
4 Oct 2006 in Regulatory Economics
Sonya Geis reports in today's Washington Post that there is an acute labor shortage in California's Central Valley. There are not enough workers to harvest and pack the tree fruits that are ready to go to market.
Growers and packers interviewed by Geis blame the shortage on a combination of intensified immigration enforcement, competition for unskilled labor from other industries such as construction, and the complexities of the federal government's H-2A visa program. None apparently have considered the possibility of solving the labor shortage by raising wages.
Geis reports that labor has been in short supply for awhile:
Farmers of all types of specialty crops, from almonds to roses, have seen the immigrant labor supply they depend on dry up over the past year. Increased border security and competition from other industries are driving migrant laborers out of the fields, farmers say.
She reports the problem as a political one, especially for Republicans, not as an economic one. She says farmers hoped that recently proposed federal legislation, the Agricultural Job Opportunity, Benefits and Security Act, would solve it. The bill, a bipartisan effort cosponsored by Sens. Larry Craig (R-ID) and Edward Kennedy (D-MA), was strongly supported by Republican-leaning farmers such as the American Farm Bureau Federation and Democratic-leaning activists such as the United States Conference of Catholic Bishops. The bill would have significantly altered the H-2A visa program for temporary agricultural workers.
The H-2A program "establishes a means for agricultural employers who anticipate a shortage of domestic workers to bring nonimmigrant foreign workers to the U.S. to perform agricultural labor or services of a temporary or seasonal nature." But employers must meet certain requirements, some of which appear to be potentially too expensive to make the program worthwhile:
Before the U.S. Citizenship and Immigration Services (USCIS) can approve an employer's petition for such workers, the employer must file an application with the Department stating that there are not sufficient workers who are able, willing, qualified, and available, and that the employment of aliens will not adversely affect the wages and working conditions of similarly employed U.S. workers. The statute and Departmental regulations provide for numerous worker protections and employer requirements with respect to wages and working conditions that do not apply to nonagricultural programs. The Department's Wage and Hour Division, Employment Standards Administration (ESA) has responsibility for enforcing provisions of worker contracts.
Taken literally, the importation of temporary labor under the H-2A program may not have the effect of reducing wages in any domestic labor market, including labor markets governed by collective bargaining agreements. But labor markets are highly responsive to changing wages and working conditions, and unskilled labor is especially responsive. The only practical way to import temporary agricultural labor without reducing wages elsewhere is to prevent labor mobility between the agricultural and other sectors. This may explain why one farmer interviewed by Geis insists that local people "don't want to do the work at any price." For this to be true, the quantity of labor supply in seasonal fruit packing must be unresponsive to wages -- a condition not found in any other labor market.
Geis quotes one farmer who acknowledges that the problem with the H-2A program is that meeting its requirements is too expensive:
"We explored [H-2A], and it was so cumbersome, it just would not meet our needs," said [Pat] Ricchiuti of P-R Farms, who grows apples, nectarines, nuts and grapes in California's fertile San Joaquin Valley. "It's so specific; you agree to hire so many people at this time. What if the season is two weeks late? I have to have work for them. Or pay them to do nothing."
This inevitably leads farmers to hire undocumented (i.e., illegal) workers. But increasingly they have to compete with other employers of unskilled labor in the service sector and construction.
"Frequently you hear, especially from California, complaints about construction companies actually recruiting workers from the sides of the fields," said Craig Regelbrugge, co-chair of the Agriculture Coalition for Immigration Reform. Other industries that depend on immigrant labor, such as landscaping and construction, "are also concerned about the overall availability of labor given demographic trends," he said, adding: "But agriculture is the warning sign, if you will, of structural changes in the economy."
If construction companies are indeed "recruiting workers from the sides of the filed," that's powerful evidence that the market for unskilled labor is extremely efficient. Agricultural employers may dislike the competition, but unskilled workers apparently like it a lot. That means the primary "structural change" going on is vigorous competition in the market for unskilled labor. Apparently, this has made exposed parts of California agriculture as uncompetitive. Still, there is no evidence that its labor shortage wouldn't vanish overnight if it offered competed for labor by offering higher wages. Geis' article suggests that agriculture has placed its hopes on government action that would enable it to hire unskilled workers without paying market wages.
