Illegal Immigration and Agribusiness (2013)
The Effect on the Agriculture Industry of Converting to a Legal Workforce
The full report is available in pdf format.
Over the past several decades, the farming sector has grown increasingly dependent on a steady supply of workers who have entered the country illegally, despite the unlimited availability of visas for foreign agricultural guest workers. This has created a situation where presently half of all crop farm workers are unauthorized and have annual incomes that are $5,600 less than that of authorized workers working in the same sector.
The agribusiness sector has consistently opposed an immigration policy that would result in a legal workforce. Their position is that current hiring practices are crucial for the survival of the industry, as Americans are not willing to do agricultural work and increasing wages to attract native-born workers would result in significantly higher food prices or a decline in American food production. Agribusiness lobbyist Sharon Hughes says, "We are either going to have our food produced by foreign workers here in the United States, or the farming process will move to foreign countries."
Since 5.7 percent of U.S. farms account for 75 percent of total farm sales, it is clear that the food supply chain of the country is almost entirely dependent on large-scale agribusinesses. Hence, their economic interests are, to an extent, linked to national interests and cannot be trivialized when considering immigration issues. But is what they are saying true?
Between 1997 and 2007, the agriculture industry enjoyed a nearly 80 percent average annual increase in corporate profits, which is higher than all other major industries surveyed. Over the same period, the average real wage of a farm worker remained stagnant and was only half that of a non-farm worker of comparable skill level. In such a situation, it would be logical to question whether increasing farm wages to attract legal workers would really have a debilitating effect on the industry.
Prior studies have focused on the impact on food prices as a result of passing on the full increase of labor costs to consumers. In this study, we explore the impact on profits of commercial farms if all the increased labor costs are absorbed by the producers and the consequent effect on overall farm business. Both these scenarios must be assessed in order to obtain a conclusion about the industry’s ability to absorb higher labor costs.
This study reveals the following findings:
- Authorized workers are observed to be willing to accept wages that are 18 percent higher than unauthorized workers in the fruits, nuts, and vegetable sector and 22 percent higher in field crops and grains.
- American citizen and legal resident farm workers work significantly longer hours compared with those who are unauthorized.
- If unauthorized workers were replaced by authorized workers at the higher average wage rate authorized workers currently earn, farms in the fruits, nuts, and vegetable sector would experience a total labor cost increase of 10 percent, and the increase for the field crops and grains sector would be 6 percent.
- Major crops like corn, soybean, and other cash grains would experience, on average, a 12 percent decrease in net farm income as a result of a 6-10 percent average wage increase.
- The fruits, nuts, and vegetables sector would be impacted the most as the average net farm income would decrease by 12 percent, yet, the average commercial farm in this sector would still have earned an average net farm income higher than that of any other average commodity farm studied (without passing on any costs to customers).
- All commodity farms including those that are impacted heavily, namely "other field crops" and "fruits, nuts, and vegetables," would still have performed profitably given higher labor costs, according to their profit margin ratio from 1996-2008.
- Small commercial farms, which are likely to have lower profit margins than the "typical commercial" farms studied in this report, do not generally produce fruits, nuts, and vegetables and are less likely to employ unauthorized workers and would be less affected by the labor cost increase associated with these crops.
- Rural residence farms would experience a lesser decline in net farm income (NFI) compared to commercial farms of the same category for all commodities studied due to their low labor requirements.