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Pundit’s Mailbag — Immigration

Jim Prevor’s Perishable Pundit, August 17, 2006

Some very incisive thoughts in response to our piece on immigration:

On immigration, much to the dismay of my shippers, I’ve long contended that the agricultural community is hooked on the drug of cheap labor. In the 60’s, people were mechanically harvesting certain vegetables for Campbell’s Soup. They had to quit doing it because labor was so cheap — they couldn’t beat the cheap labor rates — and the machine wasn’t efficient enough to overcome it. The point is, it was being contemplated 40 years ago, and it should have been an industry-wide effort ever since.

We haven’t worked on mechanization and automation in this industry because we have had no motivation to do so. Now, with fear of labor shortages, we see a frenetic pace of R&D on mechanical harvesters. I’m already hearing tales of at least four companies that will be mechanically harvesting lettuce in Yuma with less than 50% of the labor previously needed, and they also claim better quality! And this is only the start of an industry revolution.

And we haven’t attributed the correct cost to our cheap labor. Thirty percent of California prison inmates are in the country illegally. There are 20 murders per year in Salinas, a city of 150,000 people. The city spends almost $1 million on a gang task force every year. These are social costs that are borne by all the citizens of the city and state, and aren’t accounted for in the cost of the produce.

Where there’s a will, there is a way. We haven’t had the will because there was no need to abandon our reliance on cheap labor and find a better way of doing things.

This reader, who has extensive experience at the highest levels in our industry, makes the point that often gets lost in all the political battles, namely, that the industry of today is shaped based on the incentives in place today. Only a fool would extrapolate from the current situation and assume in some kind of linear fashion that if we were short 10% of the produce harvesting work force, then ultimately production must decline 10%.

Wages can go up, mechanization can change both the amount and the nature of the labor needed, consumer product preference can shift as higher wage rates lead to differential price changes on various products depending on the difficulty with growing, harvesting and packing.

In the piece we ran last week, I linked to an article by Professor Philip Martin from U.C. Davis, and I’m going link to it again for those who missed it. It is a fascinating piece that talks about what impact guest workers really have on an economy. His basic point is this:

Guest worker programs tend to increase legal and illegal immigration for two major reasons: distortion and dependence. Distortion refers to the fact that economies and labor markets are flexible: They adjust to the presence or absence of foreign workers. If foreign workers are readily available, employers can plant apple and orange trees in remote areas and assume that migrant workers will be available when needed for harvesting. Dependence refers to the fact that individuals, families, and communities abroad need earnings from foreign jobs to sustain themselves, so that a policy decision to stop guest worker recruitment can increase legal and illegal immigration.

In talking about the failure to pursue mechanization, our reader is basically referring to the distortion effect that Professor Martin refers to in his report.

In addition, our reader points to something economists call externalities. Basically this is a cost not paid by the parties in the transaction. Pollution is the classic example. In the absence of regulation or taxation, a seller of product could have a factory that bellows pollution in the air and neither the seller nor the buyer of the goods made in that factory has to suffer the effects of the damage caused by the pollution. That price — bad health, increased medical expenses, closed fisheries, etc. — is paid by an external party, typically the general public.

This reader is pointing out in his note that there are many costs to farm labor and not all of it is reflected in the price of the goods. If there are external costs to hiring the current classification of farm labor and we restrict that classification from entering, from a societal standpoint it means that there will be more resources available to deal with any problems that come about if labor does become constrained due to restrictions on immigration.

The reader’s two points together are astute and point to something problematic about both trade associations and governmental bodies: Both tend to be responsive to the industry only as it is today. The people who are going to work in factories that will produce automated harvesting equipment don’t know it yet, so they can’t lobby for their interests. The only voice that typically gets heard is from those who have something to lose from a change in the status quo.

We are glad to serve as a forum for such unheard voices here at the Pundit.

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