What is in this article?:
- Policymakers are considering changes to U.S. immigration law that would affect the market for hired farm labor—including mandatory use of an Internet-based employment eligibility verification system and an expanded program for temporary nonimmigrant foreign-born farmworkers.
- Labor is an important input to U.S. agriculture—accounting for about 17 percent of the sector’s variable production expenses and roughly 40 percent of such expenses for farms specializing in fruit, vegetables, or nursery products.
With these categories in place, researchers used the model to generate longrun (15-year) economic projections for the United States under a base forecast and two alternative labor supply scenarios—one in which the number of temporary nonimmigrant, foreign-born farmworkers increases and one in which the number of unauthorized workers in all sectors of the economy decreases. The base forecast simulates how the economy would evolve under current laws and policies and serves as a benchmark for evaluating the two scenarios.
Like many CGE models, the USAGE model achieves a longrun equilibrium in which all labor and capital resources are nearly fully employed. Thus, the simulations reported here do not apply to the current economic environment, in which about 8.1 percent of the U.S. workforce is unemployed (as of April 2012). Instead, the model results describe hypothetical longrun scenarios in which the U.S. economy is much closer to full employment and has an unemployment rate of about 5 percent.
In the first scenario (increased farm labor supply), the number of temporary nonimmigrant foreign-born farmworkers is assumed to increase by about 30,000 in Year 1 of the simulation and 83,000 in Year 2. The growth rate for the number of such workers declines in subsequent years, with participation reaching 156,000 additional workers in Year 15. The additional workers are assumed to be available to all agricultural sectors, including those that have been traditionally excluded by the H-2A program, and no constraint similar to the AEWR is placed on their wages.
In the second scenario (decreased unauthorized labor supply), the unauthorized workforce—agricultural and nonagricultural—is assumed to decrease by 2.1 million in absolute terms over the first 5 years of the scenario. Under this scenario in Year 5, the unauthorized workforce in the U.S. economy as a whole is 4.0 million people smaller than in the base forecast. Growth in the unauthorized workforce resumes thereafter but at a slower pace than in the base forecast. By Year 15, the projected size of the unauthorized workforce is 8.5 million, compared with 14.3 million in the base forecast, a difference of 5.8 million, or 40 percent.
The results from the increased farm labor supply scenario conform to basic economic principles when the supply of one factor or input of production—such as labor, land, or machinery—becomes more plentiful. Greater availability of temporary nonimmigrant foreign-born farmworkers leads to their increased employment at lower wages. This, in turn, results in longrun increases in agricultural output and exports, above and beyond the growth projected by the base forecast. The increases in output and exports are generally larger in labor-intensive sectors such as fruit, tree nuts, vegetables, and nursery products. By Year 15 of the 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.
Accompanying this additional growth in agricultural output and employment, however, would be a relative decrease of about 5.7 percent in the number of U.S.-born and other permanent residents employed as farmworkers and a 3.4-percent relative decrease in their wage rate. In the model, U.S.-born and foreign-born permanent resident workers are assumed to compete with foreign-born temporary nonimmigrant workers in the labor market. A 3.4-percent relative decrease in the wage rate does not mean that the wage rate is projected to fall by 3.4 percent over the 15-year period of the projection. Instead, it means that the wage rate in Year 15 is projected to be 3.4 percent lower in the increased farm labor supply scenario than in the base forecast.