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A Brief Look at the Market for Hired Farmworkers -- Jack L. Runyan

Introduction


Hired farmworkers are an important part of the agriculture production process. They provide an important source of labor for labor-intensive perishable crop and livestock operations, particularly at critical times when operators and family members cannot meet the labor requirements of their operations.

The purpose of this paper is to present an overview of the hired farm labor market from 1960 to 1999. The analysis addresses four questions. First, how have employment and wages for hired farmworkers changed over four decades (1960-1999)? Second, how do the changes that occurred for hired farmworkers compare with those that occurred in the non-farm labor sector? Third, how do the changes in the hired farmworker market affect agricultural enterprises? Finally, did the trends for 1990-1999 differ from those for other decades?

Several data sources were used to answer the above questions. The most frequently used source was Agricultural Statistics published annually by the National Agricultural Statistics Service (NASS), U.S. Department of Agriculture which contains production, cost of production, and cash receipt data. Hired Farm Labor, published quarterly by NASS provides farm employment and wage data. Non-farm employment and wage data were based on information appearing in

various issues of Employment and Earnings, published by Bureau of Labor Statistics (BLS), U.S. Department of Labor, as well as on the BLS web site http://stats.bls.gov/). Censuses of Agriculture were also used for estimating labor costs allocations for fruits and tree nuts, and commercial vegetables.

How Have Employment and Wages For Hired Farmworkers Changed Over Four Decades (1960-1999)?

The number of hired farmworkers decreased by about 51 percent (1,885 thousand workers to 929 thousand) over the 4-decade period (Fig. 1). With the exception of the 1973-1977 period, the number of hired farmworkers has declined fairly consistently since 1960. The largest decrease, 38 percent, occurred in the 1960s, followed by a 29 percent decrease in the 1980s.[2] However, in the 1970s the number of hired farmworkers increased by 8 percent, and remained stable in the 1990s. Another way to view change is to compare average numbers of workers employed by each decade. This comparison will give an indication that some event may have occurred in one decade that was substantially different from what occurred in other decades. For the 40-year study period, the average number employed as hired farmworkers was 1,198 thousand. The number of farmworkers decreased in each decade starting with 1,547 thousand in the 1960s, 1,246 thousand in the 1970s, 1,124 thousand in the 1980s, and ending with 876 thousand in the 1990s. If the output of farm products remained constant or increased during the 40-year period, these patterns would indicate that producers were substituting improved equipment or practices

for labor. This likely occurred for citrus, noncitrus, and commercial vegetable production (all labor intensive) where output increased 70, 86, and 126 percent, respectively, between 1960 and 1999.

Real hourly wages (in $2001) received by hired farmworkers increased 42 percent during the 1960-1999 period (Fig. 2 and Appendix Table 1)[3]. This increase occurred as the number of workers employed decreased suggesting that farm employers were competing with non-farm operations for labor or that demand for hired farmworkers was fairly inelastic. The largest per decade increase in real wages (28.9 percent) occurred in the 1960s, which was also the decade with the largest decrease in the number of workers employed. The second largest increase in real wages (10.5 percent) occurred in the 1970s and 1990s, which were the decades having percentage increases in the number of workers employed. Both of these occurrences suggest that farm employers are competing with other employers for labor, and the increased demand for farmworkers in the 1970s and 1990s may have intensified the competition and helped drive up the price of labor.

How Do The Changes That Occurred For Hired Farmworkers Compare With Those That Occurred In the Non-farm Labor Sector?

Changes in the number of workers in non-farm non-salary occupations in the total private (non-farm) workforce, as well as construction, and manufacturing (industries representing the highest potential competition with farming for workers) during the 1960-1999 period differed from the changes that occurred in the number of hired farmworkers. The number of total private workers employed increased about 137 percent (from 45.8 million in 1960 to 108.7 million in 1999), about 119 percent in construction (from 2.9 million in 1960 to 6.4 million in 1999), and about 11 percent in manufacturing (from 16.8 million in 1960 to 18.6 million in 1999) (Fig. 3 and Appendix Table 2). Unlike the number of hired farmworkers, the number of workers increased in both total and for construction in all decades. The number of manufacturing workers increased in both the 1960s and 1970s, but decreased in the 1980s and 1990s.

Real wages for hired farmworkers, total, and manufacturing workers increased about 42, 13, and 9 percent, respectively in the 1969-1999 period (Appendix Table 2). However, for construction workers real wages decreased about 10 percent during the period (data were not available for 1960, 61, 62, and 63). As shown in Fig. 4, the gap between real wages for hired farmworkers and the other workers shown has narrowed over time.

How Do The Changes In The Hired Farmworker Market Affect Agricultural Enterprises?


The wages paid to hired farmworkers are a farm production expense paid out of money generated from the sale of agricultural products. Thus, one way to measure the impact of hired labor changes is to view them in the context of changes in the farm economy.

One way to assess the impact of labor changes is to estimate the change in contract and hired labor expenditures. During the 1969-1999 period, contract and hired labor expenditures increased 16 percent (in 2001 dollars) (Fig. 5 and Appendix Table 3). At the same time, total farm production expenditures increased 24 percent (Fig. 6 and Appendix Table 3). Compared with other increases shown in Appendix Table 3, the increase in labor expenditures are low, yet they may be the expenditure that farm employers are better able to control. In the 1960s and 70s, total farm production expenditures increased 24 percent and 48 percent, respectively, faster than labor expenditures that increased 9 and 11 percent, respectively in the 1960’ and 1970s. In the 1980s total expenditures decreased faster than labor expenditures (27 percent compared with 14 percent), but in the 1990s total expenditures decreased 2 percent and labor expenditures increased 11 percent. These changes resulted in labor expenditures decreasing from a high of 11 percent of total farm production expenditures in 1960 to a low of 6 percent in 1981 and increasing to 11 percent in 1999 (Fig. 7). This suggests that relative to total production expenditures, contract and hired labor have not changed substantially over the 40-year period, but if the changes that occurred in the 1990s continue, farm employers might start adopting labor saving equipment and practices.

While total production expenditures were increasing over the 1960-1999 period, total cash receipts from all farm marketings (excluding government payments), in 2001 dollars, decreased 2 percent (Appendix Table 4). Cash receipts from livestock and livestock products decreased 11 percent and those from crops increased 8 percent (Fig. 8 and Appendix Table 4). As shown in Fig. 8, receipts for livestock, crops, and total increased in the 1960s and 1970s, and decreased in the 1980s and 1990s.

Another way to assess the changing importance of labor costs to farm operators is to estimate the amount of cash receipts per dollar of labor expenditures. If real cash receipts per real dollar of labor expenditures are decreasing, it may be a signal that efforts should be made to increase the efficiency of labor. An increase in cash receipts per real dollar of labor expenditures may be a signal that labor is being used efficiently. As shown in Figure 9, cash receipts per dollar of labor expenditures decreased 16 percent over the 1960-1999 period. However, during the decades in the study period cash receipts per dollar of labor expenditures fluctuated, increasing slightly in the 1960s (4 percent), fluctuating quite remarkably in the 1970s (45 percent increase between 1970 and 1973, and ending the decade with a 26 percent increase), and decreasing in the 1980s (11 percent) and 1990s (22 percent). This finding indicates that, in general, labor expenditures, like other production expenditures, are increasing faster than cash receipts. Relative to increases in other production expenditures, labor’s increase was quite small (Appendix table 3). Since individual producers of farm products have minimal impact on product pricing decisions, this pattern could be an indication that employers need to study all areas of their operation for cost savings.

To show how changing labor expenditures might impact on individual enterprises, two enterprises (fruits and tree nuts, and vegetables) that have been labor intensive throughout the period of study were selected for further analysis. Annual cash receipts for these enterprises are estimated by the Economic Research Service, U.S. Department of Agriculture and published in Agricultural Statistics. However, published production expenditure data, including annual contract and hired labor expenditures, are for all farm production enterprises combined. To conduct the proposed analysis, contract and hired labor expenditures were allocated to fruits and tree nuts and vegetable production. Hired and contract labor expenses, by enterprise, appear in the Census of Agriculture which is published every 5 years. This allocation was accomplished by using data from both sources. First, average contract and labor expenditures for fruits and tree nuts, and vegetables as percent of total contract and hired labor expenditures for each decade were estimated from data in the Censuses of Agriculture, assuming that the percentage for each year in a decade was the same as the average for the entire decade. Based on this allocation process, the estimated labor expenditures increased by 70 and 75 percent, respectively, for fruits and tree nuts and vegetables during the study period (Fig. 10).

Cash receipts for fruits and tree nuts, and vegetables increased 43 and 37 percent, respectively, during the period (Fig. 11). With labor expenditures increasing faster than cash receipts, cash receipts per estimated dollar of labor expenditures decreased by 16 and 22 percent, respectively, for fruits and tree nuts and vegetables (Fig 12). The cash receipts per labor expenditure decrease for fruits and tree nuts was the same as for all farm products, but for vegetables it was 3 percent more than for all farm products (see above). This may be an indication that employers, especially vegetable growers, might do well to consider adopting labor saving methods and equipment to their operations. Although no estimate of other production expenditures were made for fruits and tree nuts and vegetables, they probably followed the pattern exhibited by total production expenditures. If so, employers may need to study all areas of their operation for cost savings.


Did The Trends For 1990-1999 Differ From Those For Other Decades?


During the 1990s, hired farmworkers accounted for about 28 percent of agricultural employment (Appendix Table 1). The percentages of other components of the agricultural workforce also remained fairly stable during the decade. Dividing the farm workforce into family workers and paid workers (hired and agricultural services), the paid group would have accounted for 36 percent of the farm workforce in the 1990s. The percentage of paid workers did not change substantially over the decade. In terms of percent change in the number of hired workers over time, the change in the 1990s was positive (4.2 percent). This was one of the two increases, albeit the smallest, occurring in the decades between 1960 and 1999 (1970s being the other). The change in real wages in the 1990s (10.4 percent) was about the same as in the 1970s (10.5 percent).

The percentage growth in the number of workers for total private and construction occupations (19 and 25 percent, respectively) increased considerably faster than in hired farmwork occupations (4 percent) in the 1990s (Appendix Table 1 and Appendix Table 2). Even though the increase in the number of hired farmworkers was lower, the increase in their real wages was considerably higher (10 percent) than total private (4 percent) and construction (2 percent decrease) (Appendix Table 1 and Appendix Table 2). Thus, during the 1990s the gap between real wages paid to hired farmworkers and those paid to total private, construction, and manufacturing workers narrowed. In 1990, hired farmworkers had real wages amounting to 55, 40, and 51 percent, respectively, of those in total private, construction, and manufacturing, but these percentages had increased to 59, 45, and 56, respectively, in 1999.

Expenditures for contract and hired labor increased on U.S. farms by 11 percent in the 1990s and cash receipts from all farm marketings (excluding government payments) decreased 13 percent. This resulted in a decrease in cash receipts per dollar of labor expenditures by 22 percent, the highest of any decade in the study period.

Cash receipts for fruits and tree nuts, and vegetables increased 2 and 4 percent, respectively, during the 1990s. Labor expenditures increased 11 percent, resulting in cash receipts per estimated dollar of labor expenditures decreasing by 8 and 6 percent, respectively, for fruits and tree nuts and vegetables. The cash receipts per labor expenditure decrease for fruits and tree nuts were substantially less than for all farm products. However, the 1990s were the only decade in which the change in cash receipts per estimated dollar of labor expenditures was negative.

To determine how the 1990s compared to the other decades, the period was divided into two parts, 1990-99 and 1960-89, linear trends were estimated for both periods, and the differences in their trend slope parameters were tested for significance (95 percent level). As a result of this analysis, only the trend variables for cash receipts per dollar of labor expenditures and estimated labor expenses for vegetable production differed between 1990-99 and 1960-1989.[4] From this one could conclude that trends in the farm labor market, measured in this study, have been fairly consistent since 1960.

Summary


The purpose of this paper was to briefly study the hired farm labor market during the 1960-1999 period. As a result the following points were summarized:

· The number of hired farmworkers as reported by NASS decreased by about 51 percent and real hourly wages (in $2001) received by hired farmworkers increased 42 percent during the 1960-1999 period. These trends suggest that farm employers were increasingly competing with non-farm operations for labor.

· Changes in the number of workers during the 1960-1999 period in total private (137 percent increase), construction (119 percent increase), and manufacturing (11 percent increase) non-farm non-salary occupations differed from changes in the hired farm occupations. Real wages increased more for hired farmworkers than those for the other occupations, resulting in a narrowing of the gap between real wages for hired farmworkers and other workers and indicating that hired farmworkers have fared well in relative wages.

· Contract and hired labor expenditures (in 2001 dollars) increased 16 percent during the 1969-1999 period and total cash receipts from all farm marketings, excluding government payments, in 2001 dollars, decreased 2 percent, resulting in cash receipts per dollar of labor expenditures for the study period decreasing 16 percent. Since individual producers of farm products have minimal impact on product pricing decisions, this pattern could be an indication that employers need to study all areas of their operation for cost savings.

· In the 1990s, the number of hired farmworkers increased slightly (4 percent) and real wages increased over 10 percent. The gap between wages paid to hired farmworkers and other workers decreased in the decade. Expenditures for contract and hired labor increased on U.S. farms by 11 percent and cash receipts from all farm marketings (excluding government payments) decreased 13 percent, resulting in a decrease of 22 percent in cash receipts per dollar of labor expenditures, the highest of any decade in the study period.

· As a result of comparing the 1990s with other decades, only the trend slope parameters for cash receipts per dollar of labor expenditures and estimated labor expenses for vegetable production differed, at the 95 percent level, between 1990-99 and 1960-1989. These patterns suggest that trends in the farm labor market have been fairly consistent since 1969.