2006 April 27 Thursday
End To Illegal Alien Labor Would Cost Farmers Little

The Utah Farm Federation Bureau tries to argue that a loss of illegal alien labor would cause US farmers big costs.

“Utah will not be immune from the costs if Congress ultimately approves a new immigration law that does not account for agriculture’s needs for guest workers, like the bill passed by the U.S. House of Representatives last year,” said Leland Hogan, President of the Utah Farm Bureau Federation. “The consequences for American agriculture including Utah’s farmers, ranchers, food processors, nursery industry and landscapers will be dire.”

Failure to include a comprehensive guest-worker provision in any new or reformed immigration law could cause up to $9 billion annually in overall losses to the U.S. agriculture industry and losses of up to $5 billion annually in net farm income, according to the Farm Bureau study.

Referring to the article above a correspondent (who prefers to remain anonymous) says clearly the relatively small amount of money quoted in the study as saved by farmers using illegal aliens show that US agriculture can get along quite easily without cheap illegal workers.

The article below [above] was clearly written to promote guestworkers/Open Borders/illegal immigration/etc. However, the numbers point rather strongly in the other direction. The Farm Bureau estimates total losses of only $9 billion if illegal immigration was controlled/stopped. This is around 0.077% of U.S. GDP. Of course, the costs of illegal immigration dwarf this number. Note that the estimated net losses are even smaller, only $5 billion.

The other useful note is that only one sixth of the farm labor force is illegal (based on the article below [above]). Family members account for two thirds of the workers and lawful laborers another sixth. Obviously the illegal workers could be readily replaced with a few more hired workers and additional mechanization.

Farm subsidies are currently running around $18 billion per year (far less than most people imagine). Raising that amount to $25 billion a year to eliminate illegal aliens would be far cheaper than any of the guestworker programs currently under consideration. I don't advocate this course of action (expanding farm subsidies). However, the numbers show a clear lack of any economic rational for guestworkers/illegal immigration for agriculture.

The United States has a long and honorable tradition of family farms. Within reason it is a tradition that should be promoted, encouraged, and preserved. Stopping illegal immigration and enabling family farms to continue to rely on their own family labor to competitively produce agricultural products would be a net plus for our nation. Certainly we should not allow illegal immigration to drive family farms out of business.

My most fundamental objection to the "we can't get along without cheap foreign labor" argument is that low salaries are a strong indicator that poorly paying jobs have low economic value and loss of foreign workers to do those jobs will cost the US economy very little, if anything. Of course, absent the cheap foreign workers many of the jobs now done by illegals would still get done by Americans, albeit at higher salaries. Also, employers would make bigger use of capital equipment and of production methods that reduce labor needs.

The deportation of illegal aliens would have little impact on prices of agricultural goods because field hands are just one small cost among many costs in the chain of production that brings crops into stores. Farmers spend on fertilizer, tractors, seed, harvesters, fuel, water, insurance, taxes, marketing (big fruit vegetable farms have full time sales forces), and office work to do billing, ordering, and regulatory compliance.

Since illegals create many costs that are not directly paid by farmers (e.g. medical care, crime, education for children, etc) the farmers who hire illegal aliens effectively get subsidized labor which is partially paid for by taxpayers. Cut off that supply of labor and the small cost increases for fruits and vegetables will be more than made up in the system as a whole by reductions in costs to the rest of society in other areas.

A US Department of Agriculture web page puts the $5 billion figure above into perspective. An end to illegal alien labor on farms would reduce net farm income perhaps 7.8% if the Utah study is correct.

In 2005, net farm income is forecast to be $64.4 billion, down $9.2 billion from the record $73.6 billion estimated for 2004. Income is forecast down in 2005 only because in 2004 income rose $14.4 billion over the previous year to reach an unprecedented level. In 2004, both crop and livestock commodities experienced exceptionally favorable market and/or production conditions. Corn production set a new record and harvests of other crops were large. Prices for major crops declined late in the year and are forecast to be lower in 2005.

Most financial indicators for 2005 are forecast to fall between the levels of the two prior successive record years – 2003 and 2004. The value of production in the U.S. farm sector is forecast to be $249.2 billion in 2005, following successive record levels of $240.9 billion in 2003 and $270.5 billion in 2004. Farms are forecast to contribute $109.4 billion in net value-added to the U.S. economy in 2005, following successive record levels of $101.4 billion in 2003 and $118.0 billion in 2004. Farm operators are forecast to earn collective net farm income of $64.4 billion in 2005, following two successive years of record income, $59.2 billion in 2003 and $73.6 billion in 2004.

Net cash income is forecast to exceed the record level of 2004 because farmers postponed sales of portions of the bumper harvests from 2004 into 2005, anticipating that market prices will rise as the markets work through the large quantities. Total crop revenues from cash receipts and government payments are forecast to be a record $128.7 billion in 2005, exceeding the successive records of $127.7 and the $122.1 billion in the 2 prior years. Large crop supplies have dropped market prices low enough to bring government programs into play.

But the people who work for farmers would experience a rise in living standards. Plus, farmeres would adopt labor saving technologies at a faster rate. In the medium to long run farm productivity would rise so much in response to higher labor costs that prices for farm products would drop more rapidly and we'd all be better off.

Share |      By Randall Parker at 2006 April 27 08:00 PM  Immigration Economics

JohnS said at April 28, 2006 6:29 AM:

This study just confirms the obvious: importing cheap unskilled labor has little direct economic benefit and the social costs of the policy are far greater in aggregate.

No country in history ever became richer importing poverty.

D Flinchum said at April 30, 2006 3:49 AM:

The cost of gasoline has more to do with the price of fresh produce than the cost of labor to harvest it.

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