Author: Alejandro Gutierrez-Li

The United States has faced a shortage of farmworkers for several decades. In areas of the country that grow labor intensive crops, the lack of a reliable supply of agricultural workers is one of the main concerns among farmers. The reduction in the availability of workers in the fields is attributed to multiple factors, including a reduction in the number of undocumented immigrants engaging in agricultural work, increased border enforcement, and the reticence of native-born individuals to take physically demanding jobs even in periods of high unemployment (Gutierrez-Li, 2022). 

While the decline in the number of farmworkers may be explained in part by fewer people interested in taking agricultural jobs, the exodus to other sectors is also increasing over time. One of the main industries to which agricultural workers are moving is the field of construction. This sector requires a similar skillset to agricultural work, which facilitates workers’ mobility out of the farm sector (Barham et al., 2020). One incentive that motivates farmworkers to leave farm work to find jobs in construction is relatively higher wages. According to the U.S. Bureau of Labor Statistics, the mean hourly wage of a construction worker in 2021 was $21.22, compared to $14.27 in the agricultural sector. 

In addition to offering better wages, the construction sector has been luring farmworkers as metropolitan areas in the nation are experiencing rapid growth, thereby requiring additional labor to complete real estate developments. As seen in Figure 1, some of the fastest growing cities are in the Southeast. These include areas–Charlotte/Raleigh-Durham in North Carolina, Nashville in Tennessee, Atlanta in Georgia, Jacksonville/ Miami in Florida, and multiple cities (Austin, Dallas, Houston, San Antonio, Fort Worth) in Texas—have also experienced a sizable increase in population. The rise in urbanization in southern states has been driven by their relatively larger percentages of gross domestic product (GDP) growth as shown in Figure 2. If urban development continues to accelerate in states where the agricultural industry is heavily dependent on a human workforce, it is expected that farm labor shortages there may continue to worsen, and the demand for H-2A foreign agricultural workers will continue to rise. 

Figure 1. Population size and growth rates in the 50 largest U.S. cities

Figure 2. Growth in Gross Domestic Product in 2022

References

Barham, B. L., Melo, A. P., & Hertz, T. (2020). Earnings, wages, and poverty outcomes of US farm and low‐skill workers. Applied Economic Perspectives and Policy, 42(2), 307-334.

Frey, W. (2021). 2020 Census: big cities grew and became more diverse, especially among their youth. Report. Brookings Institution. Washington D.C.

Gutierrez-Li, A. (2021). The H-2A visa program: addressing farm labor scarcity in North Carolina. NC State Economist. North Carolina State University.

The American Growth Project. (2022). 2022’s Fastest-growing U.S. cities, ranked. October report. Kenan Institute of Private Enterprise. University of North Carolina, Chapel Hill.

Author: Alejandro Gutierrez-Li

Assistant Professor and Extension Economist

alejandro-gil@ncsu.edu

---

Gutierrez-Li, Alejandro. “Urban Development and Farm Labor Scarcity: Are Workers Leaving Agriculture for Construction?” Southern Ag Today 2(50.5). December 9, 2022. Permalink

Labor markets remain strong despite predictions by some economists that the country may be heading into a recession. After a substantial increase in unemployment due to the lockdowns imposed at the onset of the pandemic, there has been a strong recovery in the demand for workers. At the same time, the availability of labor has been reduced as a result of increased government benefits, ongoing fear of contracting COVID, substantial reductions in immigration, an increase in people’s savings, career moves (and transitions to self-employment), and early retirement of older workers (Mitchell et al., 2021). The combination of strong demand for labor and a reduction in the supply of workers has led to shortages across the board, including in agricultural industries that are heavily reliant on labor like specialty crops.

The number of unemployed persons per vacancy since 2007 is shown in Figure 1. In the last fifteen years, the peak of unemployment was experienced in 2008 (during the Great Recession). Back then, there were almost seven people competing for every available job. In May of 2020, about two months after the start of the pandemic closures, the ratio was five people for every job. The latest data point (May of 2022) evinces that, two years after the onset of the pandemic, the ratio went down to 0.5. In other words, there is currently half a person available for every job posted or, equivalently, there are two open jobs for each unemployed worker!

Economic theory predicts that all else equal, whenever there is a shortage of a good or service, its price goes up. The cost of worker hours offered to the market is captured by total compensation, which includes salaries and wages, health and retirement benefits, and other monetary and nonmonetary incentives. Total compensation for civilian workers went up by 1.4% for the three-month period ending in March 2022 (first quarter), and by 4.5% for the twelve-month period spanning March of 2021 to March of 2022. Increases in wage rates, coupled with supply chain and other disruptions, have impacted all sectors of the economy, giving rise to inflationary conditions. In response, the central bank has started to increase interest rates (and thus borrowing costs) to cool down the economy. The effect of these changes on the labor markets will be seen in the following months.

Figure 1. Number of Unemployed Individuals Per Job Opening, U.S., May 2007 – May 2022

Figure 2. Three-month Total Compensation Percentage Change, U.S., 2017-2022

---

References

Mitchell, Josh; Weber, Lauren; and Chaney, Sarah. (2021). Wall Street Journal, Eastern edition; New York, N.Y. Article published the 15 of October of 2021.

Gutierrez-Li, Alejandro. “Job Market Behavior During Pandemic Times“. Southern Ag Today 2(33.5). August 12, 2022. Permalink

Farmers all around the country are experiencing difficulties recruiting and retaining agricultural workers. The farm labor scarcity problem is particularly acute for key sectors in the Southeastern United States like specialty crops (fruits and vegetables), the green industry (ornamental plants and other commodities), and livestock (cattle and dairy) which are heavily reliant on labor. As shown in Figure 1, a significant fraction of farmworkers is believed to be undocumented. There are two projects currently under discussion in the Senate (which passed the House) that if approved, would substantially change existing immigration rules. Both initiatives include legalization avenues for farmworkers.

The first project, the 2021 U.S. Citizenship Bill, was sent to Congress by the President on his first day in office. The bill substantially changes all the current immigration system and has three main goals: a) providing pathways to citizenship and strengthening labor protections, b) prioritizing smart border controls, and c) addressing the root causes of immigration. 

The second project, the Farm Work Force Modernization Act, is specific to the agricultural sector. The bill has three main objectives. First, it creates a pathway to citizenship for unauthorized farmworkers. Second, it substantially modifies and expands the H-2A program by allowing some workers to stay year-round and granting overtime payments. Third, the bill requires all agricultural employers to use E-Verify to check that newly hired individuals are legally authorized to work in the United States.

Any changes to the current immigration system could affect producers of labor-intensive agricultural commodities via at least two channels. First, by affecting the number of foreign workers willing and able to continue farming (as opposed to switching jobs to competing sectors like construction). Second, the changes would alter the costs of hiring workers. The fate of these two projects may be defined in the following months.

Figure 1. Legal Status Breakdown of Hired Crop Farmworkers: 1991-2016

Gutierrez-Li, Alejandro. “Immigration Projects Under Discussion: Why Do They Matter for the Agricultural Labor Supply?“. Southern Ag Today 2(32.5). August 5, 2022. Permalink