Economics Assignment: Analysis of US Agricultural Labor Shortage

This economics assignment analyzes the labor shortage issues in the US agricultural sector, focusing on the challenges faced by fruit and vegetable producers, particularly lemon producers like Limoneira. The report examines the decline in low-skilled immigrant labor, increased border security, and the resulting imbalances in supply and demand. It interprets these issues using economic concepts like supply and demand curves and price elasticity. The analysis further explores the government's policy implications, including increased imports and the strategies adopted by farmers, such as raising wages and utilizing the H-2A visa program. The report also critiques the problems associated with these strategies, highlighting the contradiction with the government's policy of retaining jobs for American citizens. Overall, the assignment provides a comprehensive overview of the economic challenges and potential solutions within the US agricultural sector.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Author
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Article Overview........................................................................................................................2
Economic Interpretation.............................................................................................................4
Policy and Strategy Implications...............................................................................................6
Problems of the strategies taken.................................................................................................7
References..................................................................................................................................9

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Introduction
Economics as a discipline, has undergone immense dynamics and integrations over
the years with the conceptual framework and theoretical assertions modifying according to
the dynamics seen in the global economy and in the behaviour of the different economic
agents, producers and consumers mainly (Hall and Lieberman 2012). The economic
principles and conceptual frameworks play crucial roles in explaining the different problems
of concern which crop up in different parts of the global economic scenario and the same also
help in finding plausible solutions or way outs to combat those problems (Baumol and
Blinder 2015).
Keeping the above discussion into consideration, the concerned report tries to identify
the chief economic issues cropping up in one of the most influential and globally dominant
economies, that is the economy of the United States of America referring to the article
published in The Economist, on July 27th, 2017. The article titled, “If America is overrun by
low-skilled migrants…. – The market for lemons”, tries to highlight some serious issues of
economic threat, which the agriculture sector as a whole and primarily the lemon producing
sector of the country has been facing in the contemporary period (The Economist, 2018).
Article Overview
The concerned article, sights the situations of the lemon producing companies of the
USA, especially the Limoneira, the largest company in the country in this industry. The
company, in the earlier periods used to have enough workers for their lemon and avocado
fields, the primary reason behind the same being that the company, supported by the previous
government policies and infrastructures, used to provide enough incentives to their workers
in terms of competitive wages and other perks like comfortable and highly subsidized
housings (housings being provided at 55% below the rates which usually prevail in the

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markets of California), other facilities like credit union, parks and family spaces (Guan et al.
2015). However, in the recent periods, the company, along with other fruits and vegetable
producers in the country have been facing a severe crunch in the number of workers for their
agricultural fields. This in turn has resulted in tremendous negative implications on the
agricultural sector of the country and on the economy of the country as a whole (Gonzalez
2015).
On one hand, due to the lack of agricultural labours, the fields remain unploughed or
the vegetables and fruits rot to a massive extent due to the absence of the labours to pick them
up. On the other hand, due to the lack of supply in the vegetables and fruits, which are
necessary commodities, the country has resorted to import more and more of them from other
parts of the world, thereby hurting the balance of payment of the country (Tocco, Davidova
and Bailey 2012).
The main reason behind this lack of workers in the agricultural sector, as per the
article has been pay scales for the workers in the recent times, which has also been clubbed
by the reduction in the number of low skilled immigrants from different countries like that of
Mexico and others, entering the country (Peri 2012). The reason behind this lack of entrance
of these immigrants can be attributed to the recent increase in the border security and the
recent government policies to reduce the number of immigrants in the country as a whole.
The main issues which the article has highlighted in this context, are the issues of
demand and supply imbalances, the issues of payments and also the issue of immigration of
low skilled workers by increasing the agricultural visas. The farmers have however, started
responding to these problems, mostly in two ways- either by increasing the wages of the
existing labour force, thereby motivating more labour to join their workforce, or by
increasingly bringing in cheap labours from other developing countries with the help of

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increased agricultural visas, as can be seen from the hike in the number of agricultural visas
given by the country in the last few years (Sexton 2012).
Economic Interpretation
The issues highlighted in this article can be interpreted and analysed in the light of the
existing economic concepts and theoretical framework. The primary problem which has been
cited by the concerned article regarding the agricultural sector in the country is the recent fall
in the labour force, especially the low skilled ones (Pindyck and Rubinfeld 2014). In the
previous years, the agricultural sector used to have enough low skilled workers, most of them
being immigrants, migrating from other economically and politically disturbed countries
looking for economic stability, a job and a place to stay with their families. These being
provided by the farmers, the same were able to retain the workers.
However, with increase in the border security of the country, to stop illegal
immigrants especially, from other neighbouring countries, the number of low skilled
immigrant labour has decreased to some extent, which thereby leaves the farmers with the
only option to hire from the exiting labour force of the country. However, the existing labour
force, consisting mainly of the residents of the country, may not be very eager to work at the
current wage rates, thereby reducing the number of labours working on the agricultural fields
of the farmers (Friedman 2017). This situation can be explained with the help of the
following figure:

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Figure 1: Impact of fall in the supply of labour in the agricultural sector of the USA
(Source: As created by the author)
As can be seen from the above figure, due to the fall in the immigrants coming from
Mexico, specifically, the labour supply has decreased considerably and the existing labour are
not seen to be willing to work in the previous wage levels (Marked here by P*).
This in turn has resulted in decreasing the production as well as supply of the fruits
and vegetables in the country. However, fruits and vegetables being such commodities which
are necessarily found in the daily consumption baskets of almost all the residents of the
country, belonging from all socio-economic strata, the price elasticity of the same is expected
to be low (Rader 2014). This implies, that the consumers will not be able to give up
massively on these commodities even if the price increased considerably, as can be seen from
the following figure:

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Figure 2: Inelastic demand for fruits and vegetables
(Source: As created by the author)
As is evident from the above figure, due to the fall in the supply, the price is expected to
increase, however, the demand being considerably inelastic, the fall in the demand for fruits
and vegetables is expected to be lower than the increase in the price of the same due to lack
of labour.
Policy and Strategy Implications
The government, keeping this into consideration, has increased their imports of fresh
fruits and vegetables massively in the last few years, in order to prevent their residents’
sufferings, in the aspect of being deprived of necessary consumption commodities. This in
turn, has resulted in the loss of economic welfare of the government in the form of draining
out of valuable foreign exchange reserves (Greene 2013). The domestic farmers have also
been negatively affected by these imports as their capacities remain unutilized with the
foreign producers capturing greater share of the markets.

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The policy of the government of the country, in this aspect, however, should have
been more targeted to increase the production and supply of the concerned commodities in
the economy itself. This on one hand is expected to reduce the amount of imports, thereby
increasing the balance of payment of the country and on another hand is expected to help the
domestic producers in the concerned industry to increase their productivity, profitability and
sustainability.
Most of the producers in this context, have started attracting labour by increasing their
wages. This, as highlighted by the concerned article, has been taken as a labour attracting
strategy in many parts of the country. Overall the hourly wage of the workers has increased
from $8 (2000) to as high as $12, with the rates in California hiking even more ($7 to $13).
Particularly in Limoneira, the average hourly wage in the current period is seen to be as high
as $19 (Taylor, Charlton and Yúnez-Naude 2012). This cost is undertaken by the farmers to
save their farms from bigger losses of rotten fruits and vegetable supply and of the
unploughed agricultural field. On the other hand, many farmers have started to hire workers
from different countries in the form of foreign and temporary guest-workers under the H-2A
Visa programme of the country. This programme has facilitated the entry of thousands of
workers, especially low skilled ones from the developing countries on a temporary basis,
their visas being often funded by the farmers themselves (Meissner et al. 2013).
Problems of the strategies taken
The strategy of bringing in more migrant workers, legally under the H-2A visa
programme of the country, though seems to be profitable for the farmers and the consumers
in the economy for the short run, it however goes directly against the policy of retaining the
works for the citizens of the country only, which was taken by the government of the country
to decrease the number of job drains to foreign nationals. This contradiction of the
government policy, as has been done by the farmers, can lead to the loss of potential jobs of

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many Americans, thereby reducing their economic welfare in the long run. However, given
the fact that the country is presently reeling under the pressure of lack of supply of
agricultural labour, thereby reducing agricultural supplies and hurting the economy as a
whole, the strategies taken by the farmers seem to be the only solution to the problem.

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References
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University
Press.
Gonzalez, G.G., 2015. Guest workers or colonized labor?: Mexican labor migration to the
United States. Routledge.
Greene, C., 2013. Growth patterns in the US organic industry. Amber Waves, p.1D.
Guan, Z., Wu, F., Roka, F. and Whidden, A., 2015. Agricultural labor and immigration
reform. Choices, 30(4), pp.1-9.
Hall, R.E. and Lieberman, M., 2012. Microeconomics: Principles and applications. Cengage
Learning.
Meissner, D.M., Kerwin, D.M., Chishti, M. and Bergeron, C., 2013. Immigration
enforcement in the United States: The rise of a formidable machinery. Washington, DC:
Migration Policy Institute.
Peri, G., 2012. The effect of immigration on productivity: Evidence from US states. Review
of Economics and Statistics, 94(1), pp.348-358.
Pindyck, R.S. and Rubinfeld, D.L., 2014. Microeconomics.
Rader, T., 2014. Theory of microeconomics. Academic Press.
Sexton, R.J., 2012. Market power, misconceptions, and modern agricultural
markets. American Journal of Agricultural Economics, 95(2), pp.209-219.

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Taylor, J.E., Charlton, D. and Yúnez-Naude, A., 2012. The end of farm labor
abundance. Applied Economic Perspectives and Policy, 34(4), pp.587-598.
The Economist. (2018). If America is overrun by low-skilled migrants.... [online] Available
at: https://www.economist.com/news/united-states/21725608-then-why-are-fruit-and-
vegetables-rotting-fields-waiting-be-picked-if-america [Accessed 23 Mar. 2018].
Tocco, B., Davidova, S. and Bailey, A., 2012. Key issues in agricultural labour markets: A
review of major studies and project reports on agriculture and rural labour markets (No.
122847).