In a recent study, my coauthors and I find that real U.S. farm wages would have to rise by more than 10% over 10 years to keep the farm labor supply constant. The farm workforce is aging, and fewer people from rural Mexico want to work in agriculture today. As labor becomes costlier, farm producers will shift towards more mechanized production and more efficient labor management practices. This will be particularly challenging for fruit, vegetable, and horticultural producers, which have relied on a primarily immigrant workforce for many decades, but all agricultural employers are likely to feel the effects of a tightening farm labor supply.
According to the National Agricultural Worker Survey (NAWS) 73% of U.S. farm workers were born abroad and 68% in Mexico in the 2013-14 fiscal year. Since Mexico is the primary source of hired farm workers in the United States, demographic, social, and economic shifts in rural Mexico will have major impacts on U.S. agricultural labor markets. In a previous paper, with J. Edward Taylor, we measure a significant negative trend in the probability that rural Mexicans work in agriculture over time. We identify three fundamental factors explaining rural Mexico’s shift out of agricultural work: Decreasing birth rates in rural Mexico, rising education, and Mexico’s growing service-based economy, which pulls individuals off of the farm. These factors are not likely to reverse, suggesting that the U.S. farming industry will have to adjust to a smaller workforce in the long run.
Real U.S. farm wages rose steadily in the 1990s and 2000s, and real wages rose by 7.7 percentage points between 2010 and 2016. Our analysis shows that rising U.S. farm wages slow Mexico’s transition out of farm work, but do not reverse the trend. Specifically, real U.S. farm wages would have to rise by 10.07 percentage points over 10 years to keep the farm labor supply from rural Mexico to the United States constant. At the current inflation rate of 1.9% this means that the nominal farm wage would have to rise by a little more than 30% over 10 years.
As the farm labor supply tightens, U.S. farm employers seek out alternative sources of labor or labor-saving practices. The H-2A agricultural guest worker program expanded 250% between 2007 and 2018 despite the fact that many farm employers say the program is difficult to use. Acreage of handpicked fruits, including apples, peaches, and citrus, has decreased in the United States since 2002. Finally, there appears to be a renewed interest in developing and adopting labor-saving technologies. These technologies often incur high up-front capital costs, so adoption may not have been profitable in the past, but as wages rise, adoption of capital-intensive processes is expected to increase.