Immigration, Elasticity and Why Americans Won't Pick Onions (Yet)

A study released this week by NBER measures the elasticity of substitution between American workers and their immigrant counterparts — in non-economic speak, the study asks whether immigrants are good substitutes for equally skilled native workers.

While some comparisons remain murky, it appears that non-native workers are actually “perfect substitutes” for equally skilled native workers. The authors write:

In terms of the elasticity of substitution between equally skilled immigrants and natives, we conclude that the OP data, correctly analyzed, imply that the two groups are perfect substitutes. In fact, by using a statistically valid set of regression weights and by defining the earnings of a skill group as the mean log wage of the group (rather than the unconventional log mean wage used by OP), we find that the OP data reveal an effectively infinite substitution elasticity. The evidence thus implies that native workers are exposed to adverse effects from immigration-induced increases in labor supply.

The study sheds some light on the thinking behind (and backlash against) Alabama’s court-upheld crackdown on illegal immigrants. A recent New York Times article outlines the fallout in one town, describing Hispanic families leaving at night, pulling their kids out of school and selling fully furnished trailer homes for $1,000. Lawmakers cited the removal of illegal immigrants as a step towards giving jobs back to American “native”citizens, although a short-term labor shortage was expected.

Another Times article published this week, however, challenges the idea of “perfect substitutes” advanced by the NBER study and paints an alternate picture of the economic reasoning behind Alabama’s legislation. John Harold, a Colorado farmer profiled by the Times, tried to hire some unemployed Americans to work on his ranch and paid them a wage of $10.50 an hour, like the migrant workers he usually employs from the federal H-2A program (Colorado’s regular minimum wage is $7.36). The American workers quit, citing the labor as too hard – something that didn’t happen with the Mexican laborers Harold traditionally used.

Elasticity, it seems, has its limits. States that crack down on immigrants are likely facing an uncertain agricultural future, despite the economic downturn, for jobs that this era of American citizens still find too arduous. What Alabama sees as a short-term problem might be a much longer-term problem for the toughest kinds of labor, like farming. It is worth wondering, though, whether a few more years of economic hardship may change American attitudes towards what kind of work qualifies as too hard.

 


Eric M. Jones

A lot more work could be put into machines that pick crops. But I wonder how much additional the farmer would have to charge for...let's say an onion...to allow the picker's wage to be $20/hour (or whatever rate one would have to pay to get sufficient pickers)? I expect that 2000 onions/hour could be picked by the average picker.

So that's what?... 2000 pennies divided by 2000 onions? Hmmmm let's see....where's my calculator?

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And if the farmer's existing profit margin is less than one penny per onion, then the result is called "bankruptcy" for the farmer. The market doesn't pay more just because a small fraction of farmers have seen their expenses increase. Instead, the market puts those high-cost farmers out of business altogether.

Nanno

Isn't that why legal immigrants are welcomed, to do our 'dirty and hard' jobs? I would expect that equally skilled immigrants are more willing to work no matter what the job, the relative value of their wage is simply higher.

richard d

The same goes for even really skilled jobs.

Look at who's on student visas doing top research in science and engineering at universities.

Look at the demographics of the folks working in silicon valley.

One issue is that the relative wages here are way higher than what the immigrants would get at home and we've conditioned to very high wages for doing less physical or brain-busting work.

Mike B

Nobody should be doing that kind of work. All cheap immigrant labour does it forestall the adoption of automation technologies that can get human beings out of those dirty, injurious, degrading, low-skill agricultural jobs. Real progress doesn't mean that workers do the same on low skill job for more money or better conditions, it means that do higher skilled work for more money and better conditions. Hopefully this sort of labor shock will push the farmers in Alabama to innovate instead of exploit.

Peter

That's right, work like that is degrading. We all should work in an air-conditioned office. Being outdoors is too dangerous. I see my neighbors working in their garden every weekend--do they know they can hurt their backs by digging with a shovel? They might also get sunburn. Technology needs to improve--we can't have people using muscle power, unless it is in a health club.

Mike B

There's a difference between gardening for fun and having to pick several tonnes of produce irregardless of weather conditions for a paycheck that provides less extra that can be used to save up for a way out. What is degrading about such jobs aren't necessarily the conditions, but the fact that human beings are being used as bio-robots. Cogs in a mindless process that requires no skill or creativity. I think that as a species we can do better than that for the production of low cost commodity goods.

Joshua Northey

While I sympathize with your overall position.

A) We ARE bio-robots. We are not some special demi-angel create by god. We are a slightly more intelligent squirrel.

B) 90% of people in all of human history have been a cog in a mindless process.

C) We as a species cannot at this point really afford to bring the world's population up to non-mindless cog employment.

Mike B

One solution would be to shift the harvest over to Prison labour which would not only be sufficiently cheap, but also have a nice punishment component with it. Such jobs could also be required of those out on parole, but unable to find other work. Of course to make this a reasonable alternative the prisoners must be paid the full or nearly full wage, which can be held in escrow until their release. Trying to pay them <$1 an hour, which many prison jobs currently do, denies them any sort of safety cushion upon release which then results in recidivism. This has the effect of subsidizing private beneficiaries of prison labour at taxpayer expense.

stedebonnet

We tried this already in the form of chain gangs during the early 20th century. Recently, Arizona has continued the practice, and Alabama tried it in 1994, but decided to end the program after coming under lawsuit from a number of organizations, including the Southern Poverty Law Center.

Considering the number of African-Americans who are in prison compared to whites, coercing criminals into penal labor as a form of punishment and rehabilitative justice is too much like slavery. The costs of instituting such a system--both fiscally and socially--by far outweigh any potential gains that the policy might realize.

While I will agree that the low wages of undocumented farmers have retarded (to some degree) technological advancement, I have a tough time buying the argument that "nobody should be doing this type of work" suggested earlier. While the work is tough, working in agriculture under harsh conditions is still significantly better than the alternative employment opportunities. Maybe "nobody should be doing this type of work," but people are willing to do it and it presumably beats the heck out of the other options available.

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gusperver

One 'problema' with this type of jobs, is that machines cannot easily replace human labor (I disagree with Joe). Onions, peaches, tomatos, and other crops have to be picked manually, with the care that only a human being can provide. So, if we are betting on new technology, forget it; it simply won't work (at least for now). So, in the case of Alabama, what to expect next: an increase of price due to expensive labor and probably a shortage of products due to lack of labor. In the mid term, farmers and politicians have to negotiate and allow legal inmigrants to come and do the job. Of course, it is not the same paying to non-legal or legal workers; so, more price increases are anticipated. Eventually, I wonder what was the benefit-cost ratio of this political measure?

stedebonnet

Do farmers in Alabama control enough of the market to really cause a price increase? I imagine that competition exists to a level in agriculture that prevents Alabama farmers from impacting prices. Thus they will receive the same price for goods produced by legal, more expensive forms of labor. Since they will be competing with states who allow migrant workers and foreign countries with little no labor laws, rather than an increase in prices, we will see an increase in "out of business" farmers.

While I have no problem with importing our foods from foreign countries, with more severe working conditions than those in America, I'm doubting the bankrupt farmers will feel the same way. For many agriculturalists, it is more than an economic decision of adaption, but instead a question of their way of life, their heritage, their culture, etc. Non-corporate farmers are largely continuing a family legacy (on land that has been used by their ancestors for centuries). This behavior might be irrational, but it is easier to understand the "reluctance" to acquire new skills if you keep the emotional commitment to the trade in mind.

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Mike

Seriously?
A while back, NPR ran a story on the subject of journalistic integrity. One of the points made was that a reporter can ALWAYS find at least one example to support ANY position. He even described the process - if you want to support or refute some statement, make a few calls, find someone who supports it, interview them, and you’re done…
The problem is that a single example doesn’t actually mean it’s true – because of the small sample, there is a larger chance that it may be true but unreliable due to cherry-picked or otherwise unrepresentative of typical cases - it’s anecdotal.
Let’s take a little closer look at the Times article. Is it possible that the folks the farmer hired weren’t good choices, but if he kept at it he would have found the workers he needed? Could it be that the H-2A workers have already been pre-screened?
Maybe the real issue is that the folks who provide the H-2A workers are providing a service to the farmer (e.g. finding and pre-screening workers) which is of real value to the farmer and which he found difficult to do himself.
The article actually says “Mr. Harold usually hires about 50 local workers for the season — regulars who have worked summers for years — and most returned this year, he said. Finding new employees was where he ran into trouble“. So, he does hire locally. Hmmm, is the article’s title )“Hiring Locally for Farm Work Is No Cure-All”) pure BS?
Did the blogger actually read the entire article?
This leaves me wondering - Is this blog entry exposing the “Hidden Side of Everything”? Or, is it just pushing some tired political position grubbing for more exposure?
Next the blogger will be implying that all illegal immigrants pay their “fair share” of taxes.

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Juan

Yo siento que inmigracion es ingusto a la vez ya k cuando latino onrado trabajador y nada mas se dedica del trabajo asu casa ellos son los k tienen mas problemas. Cuando uno que es latino k es narco y hace trabakos sucios. Inmigracion no c mete con ellos eso se m hace muy ingusto