Ed Taylor, Diane Charlton and Antonio Yúnez-Naude recently published new economic research using nationally representative household survey data from rural Mexico that tracks workers over 30 years. Their work shows a decline in willingness of Mexican workers to seek ag labor – both in Mexico and in the U.S. Progressive Dairyman Editor Walt Cooley spoke with Charlton about the potential impacts of this trend on U.S. agriculture.

What research data have you collected?

Charlton: Colegio de México and UC – Davis conducted household surveys in Mexico in 2003, 2008 and 2011. The survey is nationally representative of rural Mexico, and there are more than 800 households in the survey.

t looks at education, number of people living in the household, land holdings, income, remittances, etc. The data set follows up with the same households in each survey round so we can track the same individuals over time.

And the survey further asks where each individual in the household works every year from 1980 up until 2010, so we know whether they worked in an agricultural or a non-agricultural sector, whether they worked in the U.S. or in Mexico each year.

What did you find when analyzing the results of these surveys?

Charlton: We used the Great Recession in the U.S. in 2008-2009 as a quasi-natural experiment to see how it affected immigration and work in agriculture. In 2007 when the survey was conducted, we could see where people were working, and we could see how that changed in 2010 directly after the recession.

What we found was that the number of migrants in the U.S. decreased during that time, and the percentage decrease in the number of migrants working in agriculture in the U.S. was greater than the percentage decrease in the number of migrants that worked in non-agriculture in the U.S., so the recession actually affected agriculture in the U.S. more than non-agriculture on a percentage basis.

This was actually surprising because the recession affected the demand for labor in the non-agricultural sector much more than it affected the demand for agricultural labor, which remained pretty steady.

We would have expected migrants to actually shift from the non-agricultural sector to the ag sector if they were staying in the U.S. We did find that some people did that, but more people shifted from ag to non-ag during that time.

We concluded that there’s a larger change going on in Mexico, and that people are actually shifting out of agricultural work.

Why are people in Mexico shifting out of agriculture?

Charlton: Answering that question is the next phase of our study, so I don’t have any numbers to quote. However, this is a global trend: As a country develops and its per-capita GDP rises, people shift out of agriculture.

This usually happens very quickly. With just a small rise in per-capita GDP, you see a very large decrease in the percentage of people working in agriculture. We think that trend is going on in Mexico. Non-agricultural sector work is growing in Mexico, education levels are rising, and people are finding jobs outside of ag.

What are the ripple effects for U.S. agriculture and its labor supply?

Charlton: It means that the supply of labor is decreasing. There are a few options for U.S. farmers. You could conclude some of these options are more viable than others.

One is to look for labor outside of Mexico, but that really isn’t so plausible because there’s a limited supply of labor in Central America, and if you go further away than Central America, it becomes much more expensive to bring labor in.

Another option is simply to shift away from labor-intensive crops, which also doesn’t seem very plausible because there’s a high demand for these crops.

It seems like the most plausible option is to try to mechanize harvest and production so that labor becomes more efficient. As the marginal productivity of labor increases, it also increases wages and requires fewer workers.

Your research references other work that indicates past minimum ag wages here in the U.S. may have been at least eight times greater than the minimum wage in rural Mexico, which attracted workers here. How will ag wages in the U.S. respond to more competition from both ag and non-ag jobs in Mexico?

Charlton: First, the reservation wage is the minimum wage required to induce workers from Mexico to come to the U.S.

The reservation wage is calculated by considering an employee’s potential earnings in Mexico plus a number of other factors, including the cost of migration, leaving family and a number of other considerations. For a worker to come to the U.S., their pay must be enough to offset those costs.

If employment opportunities and wages in Mexico increase, then that reservation wage is going to increase. That means it will require higher wages in the U.S. to induce people to come over the border to work.

We are seeing that reservation wage increase. Agriculture in the U.S. is going to be competing with agriculture in Mexico as the agricultural sector in Mexico expands.

So what was the most surprising trend from your survey data?

Charlton: It’s actually a rather difficult question to answer. I have more than 100,000 data points. The survey itself is about 20 pages long. Going through that data and trying to condense it enough to really see what’s going on is quite a bit of work.

What I’ve mostly been looking at is some of the trends of work in agriculture and migration. I think I would say the most surprising thing that I have found so far is the finding that during the latest recession there was a large percentage decrease in the number of Mexican workers working in U.S. ag jobs compared to a smaller percentage decrease in those working in U.S. non-ag jobs.

Seeing more Mexican households switch from work in agriculture to non-agriculture in the U.S. is counter-intuitive given the demand for agricultural labor in the U.S. did not decline during the recession.

Dairy producers know they have fewer individuals showing up offering to work. What do you attribute that to?

Charlton: Preliminary findings show that both an increase in GDP in Mexico and an increase in the number of border patrol agents had significant impacts on the number of people that actually came to work in the U.S. I am not at a stage to say which has had a larger impact.

What are some of the things from your survey that you’ll be digging into in the future?

Charlton: My next step is to look at what influences the decision to move off of the farm. Hopefully I’ll be able to incorporate that into the impacts on agriculture in the U.S. One of the amazing opportunities here is just having this amazing data set.

Nationally representative data pertaining to immigration is very difficult to get, especially about immigrants because it’s so hard to keep track of them. Thankfully with this data set we’ve been able to follow up with the same households over time, and we have this nationally representative sample of rural Mexico.

How does your research provide context to current discussions about setting up
a guest worker program?

Charlton: In the short term, our results suggest that a guest worker program, or a naturalization process that reduces the cost of migrating, will increase the supply of labor. But in the long run, the study shows that fewer and fewer Mexican people are willing to work in agriculture.

So these proposals are short-term solutions for U.S. agriculture. In the long run, we really need to look at alternatives to labor. PD