A Lesson In Economics and Immigration

A CBS station in Sacramento headlines: “Trump threats, minimum wage, overtime hitting California farmers hard.” Put this one in the category of “inadvertently revealing.”

Faced with an urgent shortage of workers, California farmers are desperate to be heard.

“If we can’t change the way we’re doing business, we’re at risk,” said Brad Goehring, a fourth-generation wine grape grower in Lodi.

The state has been struggling with this farm labor shortage issue for years, but it’s gotten to a point where farmers are fed-up.

As harvesting season gets underway, many growers in need of workers fear they may lose their crops, and President Donald Trump’s crackdown on immigration orders appears to only make matters worse.

President Trump’s only “crackdown”has been on illegal immigration, which is another way of saying that he is carrying out his constitutional duty to execute the laws. So apparently the growers in question have been using illegal immigrant labor, a fact the reporters never specifically acknowledge.

Goehring is among the growing number of agricultural businessmen in California who have tried a number of strategies to lure workers. From putting ads in the paper to offering benefits–such as health insurance and 401(k)s, Goehring has even increased pay on certain jobs up to $22 an hour.

So some California growers have gone to the extraordinary lengths of offering benefits, and even higher wages! The horror! Isn’t this exactly what we want? Economic growth causes employers to bid up the price of employees who help them to create value. Are liberals nostalgic for the days when poorly-paid workers were desperate for jobs and had no leverage?

“Really nothing seems to work. When you raise your wages, the guy next door raises his—-just keeps going up,” he said.

This is sometimes referred to as a competitive market. Keep bidding!

President Trump opposes illegal immigration largely because it drags down the wages of American workers. (I do, too.) I doubt that these reporters understand that they have just proved Trump’s point. When “threats” lead to a decline in illegal immigration, wages go up. Who could have expected that? Anyone with a nodding acquaintance with the law of supply and demand.

The San Joaquin Farm Bureau says California’s minimum wage going up to $15 an hour and regulations on farmworker overtime are making things even more difficult.

“The cost for our growers to just simply put that product on your table, is going through the roof,” said executive director the San Joaquin Farm Bureau Bruce Blodgett.

Blodgett adds, “The real frustration is they drive the costs up, the commodities we produce are being produced in other countries a lot cheaper than they’re produced here.”

Increasing the minimum wage will always hurt businesses and increase unemployment, if the increase puts the minimum wage above what businesses are actually paying for entry-level labor. Whether that is true in the case of California farm workers is unclear; some, according to this same news report, are turning down $22 an hour.

Something more fundamental seems to be going on:

“People from rural Mexico are not going into farm look like they did before,” said UC Davis Professor of Agriculture J. Edward Taylor.

Taylor says more than 90 percent of our hired farm workers come from Mexico, but we’re seeing 150,000 fewer farm workers each year.

“Young people growing up in rural Mexico are getting more education that gives them a ticket to higher paying jobs that demand more skills and provide them with more stable employment than they would get in agriculture. This is a case in which what is good news for Mexico, is bad news for CA farm work,” said Taylor.

In other words, it takes more than it formerly did to lure Mexicans to come to California, legally or illegally, to pick grapes. This is a good thing, not a bad thing.

Agricultural labor is, supposedly, among the jobs that Americans won’t do:

Goehring says he tried to get Americans to do the work.

“No one’s ever lasted through lunch on the first day. They just walk off the job and we don’t hear from them again. It tells us Americans simply don’t want the jobs,” he said.

Whether Americans want the jobs depends on how much they are being paid. Americans will do anything if the pay is right. Quite a few of them will even practice law.

The ultimate solution is technology that reduces the number of workers required to produce grapes and other commodities. This is, of course, a process that has been going on for a long time. In ancient times, 90% of the world’s population had to engage in agriculture in order to raise enough food to avoid starvation. That percentage has declined drastically, enabling the development of modern civilization. The trend will continue. Innovation is often driven–happily–by rising labor costs.

Professor Taylor…adds that…the alternative is to find new ways to grow these crops with fewer workers, so it’s all about technology.

Many growers in desperate need of workers are turning to machinery to get the job done like this leaf puller which replaces 25 crew members for a period of 6 weeks.
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Some farmers in California are now experimenting with other robotic replacements for farm workers to help pick crops that are traditionally only picked by hand.

And Goehring says if this is not resolved soon, he may have to reluctantly replace his grape business with almonds because if all his estate was filled with nut trees, it can be managed by three employees.

That could be a good decision. A reader who is not wholly in sympathy with California’s growers writes:

If you are unable to be viable because you cannot economically operate under the resource constraints given in the economy, one of which is the native-born labor pool…tough luck. This means that higher value opportunities are available to the labor force. Your business, if this is the model, requiring an external increase in population to remain viable, doesn’t get to expand or, if entirely dependent on importation of cheap 3rd world labor, goes out of business. This isn’t the economic activity we’re looking for to provide GDP growth per capita for existing native-born Americans.

If, like our correspondent, you went to Harvard Business School, that is the correct answer. But I might stake out a middle ground: much of the wine our family drinks comes from France, Italy, New Zealand and Australia. None of those countries relies on Mexican labor, yet somehow they have found a way to pick grapes. If paying the wages required to attract labor–or, alternatively, investing in technology that reduces the demand for labor–raises the price of American wine by $1 per bottle, I think we can all manage.

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