Adjusting to an Era of Farm Labor Scarcity

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1 Adjusting to an Era of Farm Labor Scarcity Challenges and Opportunities Diane Charlton Department of Agricultural Economics & Economics, Montana State University J. Edward Taylor Department of Agricultural & Resource Economics, UC Davis 2016 Sustainable Ag Expo November 14,

2 Rural Mexico s Farm Labor Supply Rural Mexico is the primary source of hired labor for U.S. farms Throughout the 20 th century, rural Mexico has provided an elastic supply of farm labor to the U.S. Enabled labor-intensive fruit, vegetable, and horticultural (FVH) production to expand (Martin, 2003) Discouraged labor-saving technological change Created challenges to farm labor organizing Is the farm labor supply from rural Mexico becoming less elastic? Are we reaching the end of farm labor abundance?

3 Is Something Happening Out There? Farmers across California are experiencing the same problem: Seasonal workers who have been coming for decades to help with the harvest, planting and pruning have dropped off in recent years. SF Chronicle, May 27, 2012 The workforce has been decreasing in the last two to three years, but last year it was drastic. Kristi Boswell, Farm Bureau,

4 Rising U.S. Farm Wages

5 And things are changing in Mexico too

6 Regional Farm Labor Markets in Transition Mexico is the major supplier of hired labor to U.S. farms Only 2% of California s hired farm workers are U.S.-born Guatemala has become a supplier of farm labor to Mexico Mexico is in the transitional phase of being both a farm labor exporter and importer 6

7 Fleeing the Farm Income Growth and Ag Labor Shares Source: Taylor and Lybbert, RebelText: Essentials of Development Economics,

8 Mexico: More with Less Rising Productivity in Mexico Means a Higher Ag Reservation Wage in the US 8

9 The UCD-COLMEX Mexico National Rural Household Survey (ENHRUM) Northeast Northwest South-southeast West-Central Central 9

10 Changing Character of the Workforce

11

12 Downward Sloping Regional Trends Predicted Probability of Working in Agriculture by Region

13 Key Findings from Dynamic Panel Analysis The farm labor supply from rural Mexico is decreasing by over 150,000 people each year That is a 0.97% decrease in the Mexican farm labor supply each year U.S. and Mexican farmers compete for this dwindling supply of farm workers Source: Charlton and Taylor (2014) 13

14 5. WHY the Negative Trend? A falling birthrate: Source: Jeffrey Passel, PEW Research Center A growing nonfarm economy: Recession 14

15 And Schools! % of working-age population with a secondary school in their village when 12 15

16 Mean factors expected to affect the farm labor supply

17 Unpacking the Trend: How It All Stacks Up U.S. Farm Wages Border Patrol Age, Gender, and the Unknown Changing Birthrates Rising Education MX-US Exchange Rate MX Service Employment Sum of All Time-Varying Factors MX Industrial Employment 17

18 What Does this Mean for U.S. Agriculture in the Long-Run? Historically, U.S. agriculture has depended on immigration policy and guest worker programs to ensure an elastic supply of farm labor from Mexico But immigration policy is not a solution if workers don t want to work in agriculture U.S. farmers have 3 potential options Find workers from another country or region Reduce production of labor-intensive crops Invest in labor-saving technologies and more efficient labor management practices 18

19 Expanding Guest Worker Programs Mexico already imports farm workers from Guatemala Limited size of potential workforce from other countries Logistically and politically complicated Photo: Ixtapec, Oaxaca, Mexico, 2013

20 Changing Crop Mix But there is demand for locallygrown fresh fruits and vegetables. How inelastic is that demand? How much would you pay for a hand-picked peach grown in the Central Valley? Photo: Arbuckle, California, 2015

21 And some farmers are doing more with fewer workers

22 And some researchers are developing robotic harvesters

23 What Happens to Labor When Farms Tech Up? Lessons from Shake and Catch Shake-and-catch machines surround a tree and shake fruit and nuts into a catching frame They usually replace many low-skilled foreignborn workers with a few workers with highschool diplomas and sometimes some college Most machine operators speak English and have mechanical skills Some are ex-pickers, but many did not move up from picking to machine operation 23

24 Agricultural Investment Will Have to Change Adjust to a future with fewer workers Advocates: Labor markets have changed since the tomato harvester Invest in new labor-saving practices Educate the future farm workforce Rural residents who obtain education and training usually find nonfarm jobs or import ag engineers from Mexico There is increasing pressure on employers to retain workers Invest in the networks, higher wages & benefits Good news for ag workers and rural communities Less labor, higher productivity higher wages

25 Skilled Farm Labor Migration? Mexico graduates 113,000 engineers a year, twice the rate per 100,000 residents as the US US firms operating in Mexico Praise the technical skills of graduates, including their English-language skills Emphasize that Mexican agricultural education remains more practical compared with the increasing theoretical orientation of shrinking agricultural programs in US universities Some of the foreign workers hired via the H-2A program are skilled, but most are not Will there be an expansion of skilled farm labor migration in the future? 25

26 Immigration Policy in an Era of Diminishing Ag Labor Supply US Growers Decreasingly Ag Labor Supply from Rural Mexican Households Intervening variables Economic Conditions in U.S. and Mexico U.S. Immigration Policy Border Violence Falling Fertility Rising Education Nonfarm Growth Mexico s Farms Weakening Networks Immigration policy plays a role, but it is only an intervening variable against a backdrop of diminishing farm labor supply in Mexico 26

27 Conclusion Significant negative trend in the farm labor supply from rural Mexico between 1980 and 2010 Industrial growth in Mexico and rising rural education reinforce the negative trend Higher U.S. farm wages slow Mexicans transition out of agriculture, but do not reverse the trend Best viable option for agricultural producers: Less labor-intensive technologies and more efficient labor management practices

28 Photo: Veracruz, Mexico, 2015 Thank you

29 References D. Charlton and J.E. Taylor (2016). A Declining Farm Workforce: Analysis of Panel Data from Rural Mexico. American Journal of Agricultural Economics. 98(4): J.E. Taylor and D. Charlton (2014). Adjusting to a Post-NAFTA Mexico: What It Means for California. Prepared for the Senate Hearing NAFTA: Challenges and Opportunities after 20 Years, Select Committee on California-Mexico Cooperation, State Capitol Building, May 5, D. Charlton and J.E. Taylor (2013). ARE Update. Mexicans Are Leaving Farm Work: What Does It Mean for U.S. Agriculture and Immigration Policy? Agricultural and Resource Economics Update 16(4): 1-4, J. E. Taylor, D. Charlton, and A. Yunez-Naude (2012). The End of Farm Labor Abundance. Applied Economic Perspectives and Policy, 34(4): , 29

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