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Industry Convenes In California:  Ground Zero Of Immigration Issues… Can A Guest Worker Program Prove Milton Friedman Wrong? 

Jim Prevor’s Perishable Pundit, May 13, 2013

With the United Fresh Produce Association meeting in San Diego, and one of United’s focuses being immigration, the confluence of how immigration reform might impact California agriculture is timely. So we were happy to receive a missive on the subject from Rick Eastes of Rixx International Marketing. Rick has shared his insights with us before in pieces such as these:

Pundit’s Mailbag —Immigration As An Economic Issue

Pundit’s Mailbag — Rick Eastes: Do The Right Thing With Food Safety

Perishable Thoughts —  Something For Nothing

Pundit Mailbag —  Sunkist Responds To Article

Pundit’s Mailbag — Retail Specifications Needed For Sweet Onions

Pundit’s Mailbag — Too Much Hype Over ‘Organic’?

Rick has had a varied career dealing locally and globally and working with some of the biggest names in citrus, including Sunkist and Seald-Sweet:

As the economy has begun to rebound, the Dow has moved well above 15,000, and now the president and Congress have begun debate over creating a comprehensive immigration bill, with the need for clarity of the status of the undocumented workers already in the US.

A program to allow more workers has become paramount, especially for California. Sufficient labor in California’s agricultural industry has increasingly become a subject of real concern, especially over the last 18 months.

Historically, during the winter months in the San Joaquin Valley, most of the labor was either engaged in pruning of trees and vines, or harvesting navel oranges or lemons, and labor rates and availability remained relatively stable. Now with the massive increase in volumes of Clementines and other mandarin varieties, sufficient labor to harvest even Navels can be challenged by workers being paid dramatically higher wages on a piece-rate basis to harvest mandarins — sometimes triple the rates paid for Navels or lemons.

During February of this year, the threat of fruit-damaging cold weather shrunk the ‘available’ labor force to a demand exceeding supply situation with even the standard $50/bin harvest rate for mandarins jumping to $75/bin and higher just to get the fruit off the trees pre-freeze, leaving many Navels and lemons on the tree during the cold spell.

As the San Joaquin Valley stone fruit season starts in earnest now in May, hourly harvesting labor has taken a large jump from $9/hour (minimum wage in California is $8/hour) to $10/hour and more on piece-rate, and there still is insufficient labor to meet demand — and the season is just starting.

Plantings of newer cultivars in the last decade, such as cherries and blueberries, have added even more demand for early summer labor to compete with peaches, nectarines and plums, and later table grapes. Strawberry production in California is at an all-time high as well.

Labor to harvest oranges in the month of May, which might pay $60-70 per person/day, is being attracted away to harvest blueberries and cherries where piece-rates can pay from $120-200 per person/day. Overtime and weekend rates in the peak of the season are likely to be even higher as the season progresses, and during spells of hot weather, harvest timing for critical varieties could result in serious crop losses.

Although there is hope for meaningful immigration legislation, it seems Congress is already bogging down with 49 proposed limiting amendments (at last count) from Republican Senators alone. Senator Patrick Leahy from Vermont, on the other hand, has even offered an amendment to allow for the immigration status recognition of gay partnerships, which may address social issues, but certainly not the labor-demand issues of the Nation’s most important agricultural state.

The biggest obstacles to resolving the labor issues for agriculture are the insistence by some factions to further tighten the border with Mexico, rounding up even more resident undocumented workers now in the USA. There is also a proposed amendment by Senator Lindsey Graham of South Carolina to punitively fine any employer for hiring undocumented workers and imposing stiff fines to any company that hires such workers. 

What was initially proposed as a “path to citizenship” has become encumbered by a lengthy multi-year program with a prohibitive number of requirements, including a method to calculate each of the 11 to 13 million undocumented individuals’ past income tax liabilities over the last 10 years of residence in the USA. The reality is that many of the undocumented workers have paid FICA and withholding taxes already from their paychecks for which they will never receive any benefits in the future because of their illegal status — a sort of “taxation without representation” position that played another role in our nation’s early history.

As of April 23, 2012, the Pew Hispanic Center announced that net migration from Mexico to the United States had stopped and possibly even reversed. The Center noted that from 2005 to 2010, about 1.4 million Mexicans immigrated to the United States, and about 1.4 million Mexican immigrants and their U.S.-born children moved from the United States to Mexico. When this information is added to the DHS calculation that 58% of the undocumented are Mexican and 24% of them are in California, the scope of the immigration issue for California agriculture begins to come into a sharper focus. There are estimates that California agriculture lost perhaps 600,000 to 700,000 of its labor force, leaving even fewer workers to be spread among even more work opportunities, plus demand from other lines of work.

Free-market proponent Milton Friedman of the University of Chicago stated in a speech in 1978 (it can be seen on YouTube) that, “bad laws make socially advantageous acts illegal undermining morality in general.” In his speech, it is his contention that the millions of immigrants who came in the late 19th and early 20th century with no meaningful restriction except paying passage, are the reason for our country’s rise to economic power in the world.

Free markets usually allocate resources, especially labor better than legislation. He further states that illegal Mexican immigration was “good” so long as it was illegal, because it was based on demand and did not automatically imply the benefits of citizen society. I suspect that by the accident of birth had any of us been born in Mexico and our choice of livelihood was to work for at best $10 a day or $10 an hour, it would have been difficult to keep many from finding a way to the USA to better their economic prospects, regardless of what the work entailed.

No one likes the word “amnesty” with regards to the current immigration dilemma. Many relate the word to either forced immigration due to war or human rights violations, or in the case of many opponents to immigration, as forgiveness of some criminal activity.

However, it is practically impossible to have undocumented individuals return to their birth nation, especially those who are working and have established an economic presence in the USA. It also is illogical to try to further round up the same undocumented workers who will become eligible for some legal immigration status once an immigration bill is passed by Congress.

Building, maintaining and staffing the monitoring of a border fence with no documented impact on diminishing illegal crossings at an estimated cost of $21 million/mile plus maintenance is out of the question to ‘better secure our borders’. Comedian George Lopez joked that the USA should build the fence before expelling all the Mexicans; otherwise, there would be no one to build the fence.

So, what is “at least” a partial solution to attending to the needs of California agriculture?

The economic answer is to allow anyone who can verify that they have been in the USA and have a work history of at least 3 years and no criminal convictions be given a temporary work permit. The work permit would allow for a legal driver’s license and a social security card, which would be required to track all FICA and withholding taxes as required of all citizens. If individuals are here, working and providing for their immediate family, they should be allowed to stay.

A system similar to Canada’s Temporary Foreign Worker Program needs to be adapted to the USA’s needs, which will allow foreign nationals to enter the country to fulfill seasonal work needs. The system should include some provisions that would allow temporary workers to find full time work when and if it becomes available.

The new immigration legislation is in danger of becoming so gummed up with special provisions that it will be unworkable or simply ignored. Laws that do not address the economic issues and incentives will be ignored or abused to the point of futility.

For California, without immigration legislation that allows for the ‘economic and social reality’ of our nation’s current undocumented workforce, a simple, unencumbered and realistic path to citizenship, and the means to attract new immigrants, the USA will find itself in a demand-exceeds-supply situation for a workforce to fill all of the service and agricultural functions our country needs to feed itself and even feed a good portion of the rest of the world.

Thinking back in our history, I wonder where our country would be today if the Powhatan Confederacy had turned back the passengers on the Godspeed 400-plus years ago and prohibited the foundation of Jamestown, VA? I also wonder where we would be in California if the Spanish priests had not brought the first grape cuttings and citrus trees to California as part of New Spain?

California (as is Arizona and Texas) is different and in need of special consideration of a national immigration policy unlike the states of Vermont, Wyoming, or South Carolina, for example. Let’s hope any new immigration legislation allows California to meet the present and future labor supply shortfall in a positive way.

— Richard A. Eastes
Rixx Intl. Marketing Co. Inc.
Visalia, California

The issue of immigration is, of course, complex, and that is part of the problem. The experience with Obamacare has soured many on the general concept of these 1,000-plus page omnibus bills -- the type of bill, as Nancy Pelosi famously said about Obamacare, we are expected to pass so we can then find out what is in it.

The Republicans in the House seem in favor of an incremental approach in which individual bills are discussed and debated. So if the proposal on the table is to discuss the merits of, say, an agricultural guest worker program, that is brought up as a discrete bill, debated and then voted up or down on its merits.

There is little question that such an approach is more thoughtful. Critics would argue that such an approach wouldn’t produce any law because none of these proposals have sufficient support on their own.

This isn’t necessarily true. After all, log-rolling – I’ll vote for your bill if you vote for mine – is a long and hallowed tradition in Congress. Things don’t have to be in the same bill to get support.

One can’t help but think that the real issue is that DC elites from both parties have a lot of stuff in the bill that, if people really had a chance to read and study it, they would be opposed to.

There is no question that the lobbyists for the produce industry did a stellar job and got their prime priority — an agricultural guest worker program – into the bill that is on the table. So, in the short run at least, the bill is a triumph for the industry.

Whether, long term, it will help the industry or the country is quite unclear.

The bill seems to fail at dealing with the long term issue of illegal immigration. If the bill passes and is implemented, what happens to the first illegal immigrant after it passes -- the first person who has a tourist visa and doesn’t show up when he is supposed to leave? Will an All Points Bulletin be declared on this person? If ever apprehended, what is the penalty? Isn’t the most likely implication of this bill that if people overstay their visas or enter illegally, then one day, there will be another “path to legalization”? So isn’t the whole bill likely to encourage illegal immigration in the future?

For the produce industry, our take is that the guest worker program isn’t likely to sustain itself for very long. The day the bill passes, the Unions and human rights activists will be out there starting to modify the terms. And they will be successful because it is in contrast to American values to believe that these people can be living and working in America but cannot be part of American society.

Besides, the program will be deeply criticized and ultimately ended because it won’t work out in practice as in theory — meaning the guest workers won’t go home. At the end of their guest worker pass, some significant percentage will simply meld into society as the current illegal immigrant population has.

The bill does not make sex illegal, so one can bet that a not-irrelevant percentage of the guest worker program participants will have had children while in the US – and every one of those children are American citizens. Are we really going to deport all their mothers and fathers and put the children in foster care?

The bill also does not prevent impositions on society in terms of cost. Hospitals are legally required to provide emergency care to anyone in need of such emergency care — this bill does not provide any assurance that these costs will be paid.

As all this filters out, the program will be ended just as earlier Bracero efforts were ended.

The piece from Rick Eastes is great because it is so concrete, pointing out how the price of labor changes when labor, demand and supply interact. Of course, this is true of all markets. The fluctuations of supply and demand determine prices.

For the produce industry, the availability of labor is just one of many inputs, such as the availability of appropriate soil, weather etc., that determines when and if fruits and vegetable should be planted.

Whether it makes sense to plant a field – or locate a manufacturing plant – in an area short of labor is part of the economic analysis that has to take place prior to investing.

We think in the long run, it is unlikely to be sustainable to have a special program that requires people to work in agriculture. It just doesn’t make sense to say if this person will harvest rhubarb, he can stay, but if he has the temerity to want to cure cancer, he has to leave the country.

The industry has to look to mechanization as the only realistic option. Considering we have machines that can perform operations inside the human body, it is likely that we can develop machines that can help with harvesting. We have run a few pieces related to this subject, such as these:

Pundit’s Mailbag — Labor Shortages And Globalization Will Soon Lead To Mechanical Harvesting

Pundit’s Mailbag — Immigration

Compromise Immigration Bill Gets Another Chance

Pundit’s Mailbag — Paying More For Farm Labor

Looking For Clarity On Immigration Policy

The real problem is price. If labor prices are low, none of this mechanization makes sense. If the price of labor rises, all kinds of things are possible.

For society as a whole, there are big issues.

If we allow labor prices to rise, more agricultural production will be done outside the US. Is that OK?

Even more broadly, the immigration issue is less about immigration than about assimilation policies.

Many of the Republicans who oppose immigration really don’t. That is what the Friedman quote is really all about. If we could be certain, as at the turn of the century, that people who came to the US would not be on public welfare or get free medical care, food assistance or other aid from the state… if we could be certain their children could be put into public schools where English is the only option and civics and citizenship courses are reflective of a great cultural self-confidence welcoming people to come — but insisting they come to be Americans — people’s attitudes toward immigration could change.

As long as we, as a society, are unable or unwilling to do that, then we have to expect that anti-immigration sentiment will run high and the logical reforms will be to open America to those who are already proven assets – say those with high education or cash.

There are lots of politics that are playing out. The Democrats want legalization of what are likely to be Democratic voters; the Republicans don’t want to be seen as anti-Latino, and that has driven the immigration bill to date.

The Republicans in the House, though, mostly have very safe districts. Look at the recent by-election in South Carolina, where former Governor Sanford won back his old House seat despite having been disgraced. So these big political issues will affect the House less, which just might encourage attention to the details of the bill. This is not a bad thing, as speeding locomotives have their place, but not in producing thoughtful legislation.

 

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