HispanicVista Columnists

By Luis Padilla MS
NFAPP's Newsletter : First Quarter 2005

Technology and capital increasingly know no borders, but a framework for the international movement of labor is even less clear. A division runs from high-tech to low-tech stakeholders as to what to do about immigration. However, most agree that current policies and migratory frameworks are out of step with contemporary economic and security realities. Already, voices have been raised warning that tightening borders in the absence of a new and streamlined mechanism for managing cross-border labor is keeping “creative capital” away from U.S. universities and corporate labs. At the same time, increasing affluence and demographic trends in the U.S. indicate a growing demand for less skilled immigrant labor in home services, health care, food service, and farming.

In agriculture, these needs have historically been resolved through a marriage of convenience. On the one hand, employers took their chances and got affordable willing workers; on the other; workers got a job, were able to enroll their children in school, and could even dream about joining the middle-class, or advancing their professional career. Today, this arrangement is in trouble because a large underground labor market, rife with fake documents and violent smugglers, makes it increasingly unsatisfactory to both parties. After 9/11, mutual economic self-interest remains but security and humanitarian considerations can no longer be ignored. The situation has become most critical in U.S. agriculture where 60% to 75% of the workforce is estimated to be illegal.

A clear solution as to what to do is yet to emerge. However, zero immigration groups have gotten some traction in advancing a “reform package” that includes mass deportation, sealing up the border, and denying public services. A difficulty with this approach is that deporting the estimated 8 - 12 million undocumented workers, many of whom have citizen children, would take years, disrupt the labor force, jeopardize civil liberties, and divert considerable law-enforcement resources away from homeland security. Furthermore, it fails to recognize that these measures amount to a self-imposed embargo on labor. Recent NFAPP analysis hints at the economic impact that such proposals could have on US agriculture.

Screening the illegal workforce from U.S. farms without a mechanism to replace it with a legal one, could translate into $8.8 billion per year in additional labor expenditures for US farmers, assuming no retraining costs. Virtually every farmer would be affected (Table).

Labor-intensive crops would bear 70% of the increased cost, while livestock operations 30%. Accordingly, the Pacific region is expected to bear 38% of additional hiring costs, followed by the Northeast, Southeast, and Great Lakes regions. Together, these four regions will bear 65% of the impact since most U.S. horticultural operations are located there.

Survey data indicates that fruit, vegetable and nursery growers (FV&N) will be the most negatively affected. FV&N growers will bear 50% of the cost increase and incur an additional $3.95 billion in labor expenditures or $31,347 per farm. Consequently, FV&N farmers may see their total expenses rise by 15.4%. These are averages and, thus, labor cost increases may be lower for mechanized crops and higher for crops, such as strawberries where the labor component accounts for 60% of the total bill. The impact on net income is less certain.

If FV&N growers can pass the cost downstream, net income may not immediately suffer. However, FV&N growers, who are largely price takers, may experience net income declines of 56% if they are unable to pass the cost onto consumers. The ability to pass a labor cost increase may depend on the extent of seasonal foreign imports, substitute product availability and the reaction of retailers and wholesalers. For instance, open-field tomato, strawberry, broccoli, and stone fruit grower, among others, could be the most affected, while almond growers may be in a better position to raise prices.

Thus, greater labor costs would place the U.S. horticultural sector at a disadvantage relative to foreign growers that enjoy lower labor cost and, sometimes, large subsidies. In turn, outsourcing food production will make it more costly and difficult to monitor food safety. Domestically, FV&N farmers may view program crops more attractive enterprises. At the same time, higher labor costs are going to discourage some former program crop producers (i.e. tobacco) from moving into fruit and vegetable commodities.

Lacking a mechanism to replace illegal workers with legal ones will then depress farmer’s net income, make the U.S. more dependent on foreign sources, and negatively affect U.S. consumers’ preference for and confidence in produce.

Fortunately, policy proposals which seek to balance the economic, social, and moral aspects of immigration, have been advanced. These initiatives enjoy bi-partisan support because they are based on reasoned ideas developed through a consensus of employers, unions, community groups, and migrants themselves. That such an extraordinary convergence can be achieved may be due to a growing realization that the “smart” approach is a vast improvement over the “get tough” approach.

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Luis Padilla : Faculty Research Associate
Luis joined NFAPP (at Arizona State University) in April 1999. He received a M.Sc. Degree in Agribusiness Management from ASU in 1998. Prior to joining NFAPP, Luis was a manager at the Phoenix Greyhound Park. Luis interests include US agribusiness direct investment in Latin America and international fruit and horticultural markets. He is currently responsible for the potato, celery and processing tomato models. Phone : (480) 727-1520 E-Mail : Luis.Padilla@asu.edu