In the wake of Alabama’s strong Illegal Immigration Law , which passed over three weeks ago, the state is now facing a labor crisis that has farmers struggling to plant and harvest their crops.
I was in favor of the Alabama law which really just gives Police the authority to enforce the laws on the books (imagine that) and it appears the law had its intended effect – Illegal immigrants fled the state. Now that the illegal workforce is gone, US citizens and legal residents in Alabama who are unemployed can now fill those jobs and get Americans back to work, paying taxes and increasing consumer purchasing power. Well, that was the way it was supposed to work.
According to one Farmer, Guiseppe Peturis, the unemployed people of Alabama are lazy and don’t want to do hard farm work. Mr. Peturis has tried to go through the state employment office to fill his labor needs but here is how he describes those results to NPR:
“Two of them left in 30 minutes; didn’t even tell us they [were] going to leave,” Peturis says. “One worked an hour and says it was too hard on his back.”
So one conclusion we can draw from the current Alabama situation is that the unemployed are lazy and would rather sit at home, collecting unemployment benefits instead of working a job. While there is an economic paper that proves just that – extending Unemployment benefits keeps the Unemployment Rate high – I think there might be something else contributing to this labor shortage.
It is entirely possible that the farmers have become addicted to the cheap labor that illegal immigrants provide and now the low labor rate is priced into the farmer’s business models. This low labor rate is so low that Americans have no incentive to engage in the hard farm work when they can either earn more money at an ‘easier’ job or sit at home and collect unemployment benefits. As shown in the following report, the average hourly wage for a farm laborer in 2006 was around $9.00/hour. Making assumptions for inflation and rounding up for easier math – A labor rate of $10/hour in Alabama would provide a farm laborer just over $20,000 per year (neglecting overtime). There is another report of farm laborers making as high as $18/hour in neighboring Georgia, which equates to over $37,000 per year but further analysis in that report showed that $18/hour labor rates are not the average but the extreme of the labor rate distribution. $20,000 per year is not going to draw people away from Retail, Hospitality or even Manufacturing industries so it’s not hard to see why there is a labor shortage right now.
But when faced with losing their farm or raising labor rates, each farmer will have to do what is in the best interest of his business. This is a classical Economics problem and the Market will find a rate for labor that will allow the farmer to make a profit and entice workers to fill the labor supply void. Of course this could mean higher prices at the supermarket so this economic situation affects people who don’t depend on farming for their business (i.e. Me) but adjustments to labor wage rates and food prices are what the Markets do. We might see labor rates of $18/hour becoming the norm instead of the exception with regard to farm labor wages in Alabama and then the farmers should see more people incentivized to fill those higher paying jobs.
If the Federal Government will not address Illegal Immigration then the States have no choice but to enforce the laws on the books and pass legislation copying what Alabama just did. Unfortunately for Alabama, they are suffering for blazing the trail but eventually all states will have to go through this and we should not be surprised when we encounter a correction period while the Market sorts things out. The Market will fix this short term disruption and it will do all of this without the need of a “Farming Czar”! The Invisible Hand will work through this situation so don’t be surprised at this temporary disruption – Economics predicts this will happen.