Saturday, July 10, 2010

Farm Work should be an honored, palatable job for Americans

Los Angeles Times article "Farm Work should be an honored, palatable job for Americans" (July 10th, 2010) bemoans the decline in wages for farm workers but completely ignores the economics behind these fluctuations.

By 1981, the contract provided about double minimum wage, at which point we were probably the best-compensated grape pickers in the world. We had paid holidays, and for high-seniority workers, two weeks' paid vacation; disability and unemployment insurance; family medical insurance (with 60 hours of work or more in a month); even a modest pension plan. The Coachella Valley had a UFW medical clinic for the workers and their families, and a legal aid center to help with taxes, Social Security and other issues.
The legacy of David Freedman Co. under the UFW contract is one all Americans can be proud of. It is proof that American agriculture does not have to be based on the labor of an underclass denied the rights and benefits of other workers.
Sadly, only one UFW contract remains in the Coachella Valley, and wages and benefits are not as generous as they were 25 years ago.

In fact, wages in these competitive markets are not set by the sentiments of Americans, but rather by market forces. For example, if demand for produce increased, then firms would want to increase their production. However, most farmers were likely constrained in their ability to purchase more capital (farm equipment) and so were only able to increase their demand for farm labor. This caused an increase in farm worker wages.

Again, the reason that wages increased by as much as they did may simply have been that in the short run, capital is inelastic. In the long run, it is perfectly elastic. Thus, the long-run rise in wages would be heavily mediated by substitution into high capital-share production.

1 comment:

  1. Unionization like any cartel activity can potentially produce a temporary increase in yield by forcing payment as an alternative to shutting down business. But in the end by increasing the costs of production in that unionized locale the producers are put at a competitive disadvantage, have a reduced ability to expand or invest and typically have to move to other locales in an industry with a low cost of entry such as agriculture. The real issue is that the temporary uneconomic wages the UFW earned were purchased at the expense of wiping out the producers and the job opportunities of future generations of farm workers. Reminiscent of the famous comments of Lee Ioacocca in talking about the United Auto Workers in his testimony to Congress - when he commented that they have thousands of jobs at $17 an hour but no jobs at $20 an hour. Let the record showed that the UAW ignored the economics much as the UFW did - and with the same consequences of massive lost employment opportunity in the future.