The Potential Impact of Changes in Immigration Policy on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis
by
Steven Zahniser,
Thomas Hertz, Maureen T. Rimmer, and Peter B. Dixon
Economic Research Report No. (ERR-135) 49 pp, May 2012
What Is the Issue?
This report explores the possible economic implications of large
shifts in the supply of foreign-born, hired farm labor that could
result from substantial changes in U.S. immigration laws or
policies. Hired labor (including contract labor) is an important
input to U.S. agricultural production, accounting for about 17
percent of variable production expenses and about 40 percent of
such expenses for fruits, vegetables, and nursery products. Over
the past 15 years, roughly half of the hired laborers employed in
U.S. crop agriculture have lacked the immigration status needed to
work legally in the United States. Thus, changes in immigration
laws or policies could lead to markedly different economic outcomes
in the agricultural sector and the market for hired farm labor. The
same is generally true for other economic sectors that rely on
large numbers of unauthorized workers.
To examine how large changes in the supply of foreign-born labor
would affect U.S. agriculture, we considered two hypothetical
scenarios: (1) a 156,000-person increase in the employment of
temporary nonimmigrant agricultural workers, such as those now
participating in the H-2A Temporary Agricultural Program; and (2) a
5.8-million-person decrease in the total number of unauthorized
workers in all sectors of the economy, including agriculture. These
scenarios (15-year projections) are not intended to precisely
represent the effects of any specific c policy proposals. Instead,
they provide an opportunity to consider the economic impacts of
sizable changes in the supply of foreign-born farm labor.
What Did the Study Find?
The expanded employment of temporary nonimmigrant agricultural
workers would lead to a longrun relative increase in agricultural
output and exports. The increases are generally larger in
labor-intensive sectors, such as fruits, tree nuts, vegetables, and
nursery products. By year 15 of the increased farm labor supply
scenario, these four sectors experience a 1.1- to 2.0-percent
increase in output and a 1.7- to 3.2-percent increase in exports,
relative to the base forecast. Less labor-intensive sectors, such
as grains, oilseeds, and livestock production, tend to have smaller
increases, ranging from 0.1 to 1.5 percent for output and from 0.2
to 2.6 percent for exports. While agricultural output and exports
would increase, the real wages of agricultural workers would
decrease by 4.4 percent in the long run, relative to the forecasted
wage with no policy-induced labor supply change. Increased
employment of temporary nonimmigrant agricultural workers would
have little effect on the nonagricultural economy, since hired
farmworkers make up a small share of the U.S. workforce.
By contrast, a large reduction in the number of unauthorized
workers in all sectors of the U.S. economy would lead to a longrun
reduction in output and exports in both agriculture and the broader
economy, relative to forecasted levels with no policy-induced
change in unauthorized labor supply. Fruits, tree nuts, vegetables,
and nursery production are again among the most affected sectors,
with longrun relative declines from 2.0 to 5.4 percent in output
and from 2.5 to 9.3 percent in exports, depending on the modeling
assumptions. These effects tend to be smaller in other, less
laborintensive parts of agriculture-a 1.6- to 4.9-percent decrease
in output and a 0.2- to 7.4-percent decrease in exports. Real
agricultural wages would rise, on average, from 3.9 to 9.9 percent
in the long run, relative to the forecasted wage with no
policy-induced labor supply reduction. Since unauthorized
farmworkers would be in much shorter supply, their wages would
increase from 13.6 to 39.8 percent.
Decreasing the size of the unauthorized labor force would reduce
the aggregate level of economic production and slightly lower the
income that accrues to complementary, U.S.-owned factors of
production, such as capital and skilled labor. The lost income
would be only partially offset by higher real wages for U.S.-born
and foreign-born, permanent resident workers employed as hired farm
laborers or in other lower paying occupations where unauthorized
workers were formerly more prevalent. In the long run, overall
gross national product accruing to the U.S.-born and to
foreign-born, permanent residents would fall by about 1 percent,
compared with the base forecast. The number of U.S.-born and other
permanent resident farmworkers would increase, but not by an amount
sufficient to fully offset the decrease in the employment of
unauthorized farmworkers. Among the additional U.S.-born and other
permanent resident farmworkers are some people who lost (slightly)
higher paying jobs as the economy contracted due to the decreased
supply of unauthorized labor in all sectors of the economy. This
downward shift in occupational composition reduces the average real
wage of all U.S.-born and other permanent resident
workers-agricultural and nonagricultural-from 0.3 to 0.6 percent
compared with the base forecast, even as real wages rise in many
lower paying occupations.
How Was the Study Conducted?
The authors employed a modified version of the U.S. Applied
General Equilibrium (USAGE) Model, a recursively dynamic,
computable general equilibrium (CGE) model of the U.S. economy
developed by Peter Dixon and Maureen Rimmer of Monash University in
Australia and adapted to the U.S. context in collaboration with the
U.S. International Trade Commission (USITC). Data for the base year
(2005) came from the U.S. Department of Commerce's Bureau of
Economic Analysis (BEA). Model structure, extensions, and data
sources are summarized in the main text of the report and discussed
in greater detail in the appendix.
The model generated a set of 15-year projections for three
scenarios:
• Base forecast: Current laws, programs, policies, and trends
are assumed to remain in effect, generating a baseline against
which the alternative scenarios will be evaluated.
• Simulation 1: The quantity of labor supplied annually to
agriculture by people without the U.S. immigration status of
permanent residency is assumed to increase by about 30,000 workers
in year 1, with the additional number of temporary nonimmigrant
agricultural workers rising to about 150,000 in year 15. By
comparison, 68,088 positions in the H-2A program (the current
avenue by which nonimmigrant workers can be employed in U.S.
agriculture on a temporary basis) were certified in fiscal year
(FY) 2011.
• Simulation 2: The total number of unauthorized workers in all
sectors of the economy, both agricultural and nonagricultural, is
assumed to decrease by 5.8 million by year 15 of the forecast, a
40-percent reduction compared with the base forecast. This change
corresponds to about 3 percent of the projected size of the total
U.S. workforce in year 15.