Labor input substitution decisions and business sustainability strategies under changing farm labor market conditions: comparative economic viability analyses of organic and conventional farming systems

Final Report for LS07-194

Project Type: Research and Education
Funds awarded in 2007: $120,000.00
Projected End Date: 12/31/2010
Region: Southern
State: Georgia
Principal Investigator:
Dr. Cesar Escalante
University of Georgia
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Project Information

Abstract:

This project analyzed the organic and conventional farms’ strategic responses to changes in the farm labor market conditions arising from stricter implementation of immigration policies. Quantitative and qualitative research results indicate that the usually more economically dominant organic farms may experience more limited farm labor management strategy options due to certain structural constraints. While our technical efficiency analysis establish synergy of combining several business strategies for greater efficiency, case studies, however, reveal that even offering combined, enhanced workers’ compensation, at the expense of sagging farm profits, could not attract laborers to perform menial tasks usually done by illegal foreign workers.

Project Objectives:
  1. 1. To determine and compare the strategic plans (or decisions) adopted (or intended to be adopted) by organic and conventional farm businesses in most of the Southeast region in maintaining overall business profitability and viability as farm wage rates increase due to changes in the government’s immigration policies;

    2. To identify structural, demographic and economic determinants of farm labor input substitution decisions (i.e. substituting family with hired labor, and vice versa) made by conventional farms and organic farms at various stages of business maturity (such as established versus transitioning organic farms); and

    3. To supplement the quantitative research (survey and econometric analyses) approach of objectives 1 and 2 with qualitative case studies designed to analyze relationships of business decisions and strategic actions under a whole-farm perspective, and determine other operational constraints, strategies and their business implications not captured by the other (quantitative) research method used in this study.

Introduction:

The purpose of this project was to determine the farmers’ strategic responses to expected changes in the labor market conditions as stricter immigration regulations were enforced. This project focused on structural operating differences between organic and conventional farms that differentiate their demand for farm labor. Organic farming, an economically and environmentally sustainable farming system, can be a more labor-intensive operation compared to the conventional farming system that employs larger farm machineries and synthetic agrichemicals. The organic farms’ characteristic limited use of synthetic chemical inputs requires them to implement alternative techniques for pest removal, soil additions and conservation that are usually done manually.

Several studies have provided empirical evidence on the organic farms’ greater demand for farm labor inputs than their conventional farm counterparts. Bukman (1992) found that farm labor use among Dutch farms is 20% higher in organic livestock breeding and 50% higher among organic crop farms (arable farming and horticulture). Padel and Zerger (1994) analyzed German farms and found that the number of workers employed was 12% higher for organic farms, both on a per farm and hectare bases. Among U.S. farms, estimated labor requirements for a mix of livestock and crop farms in the Corn Belt were 19.8 and 17.8 hours per $1,000 of crop output for organic and conventional farms, respectively, on a whole-farm basis (Klepper, et al., 1977).

Crop choice is an important factor that determines the relative greater use of farm labor inputs among organic farms vis-à-vis conventional farms. The divergence in labor requirements of these two farming systems can be larger when comparing farms growing certain individual crop types. Dubgaard (1994), for instance, found that organic farms in Denmark utilize twice as much labor inputs per hectare as conventional farms. He attributes this result to the larger share of more labor-intensive operations (vegetables and dairy production) in the organic farming systems he analyzed. He estimates a reduction in the difference from ½ to ? if such structural differences are eliminated.

Organic farmers in the Southeastern region face even more challenging growing conditions. The region’s mild winters, long warm summers and abundant moisture define the need for soil enhancement management techniques to address the rapid decomposition of organic matter and the more compounded weed and pest problems. A SARE-funded project (#LS06-190), for instance, investigates on an alley cropping system that is designed to address this need. This and other non-traditional organic management practices designed to address the significantly different agronomic conditions of the South translate to even higher labor requirements.

The high labor-dependence of organic farms could potentially make them more economically vulnerable under the expected changes in the farm labor supply conditions due to the implementation of new immigration policies. In mid-September this year, the U.S. House of Representatives voted in favor of a bill that provides for the construction of a 700-mile fence along the US-Mexican border designed to keep illegal immigrants from entering the country (Gamboa, 2006). The bill also provides for stricter patrolling of the border by the Department of Homeland Security (Heneroty, 2006). This latest bill from the House echoes its earlier bill passed in December last year that provided for the same border fence construction as well as the requirement for employers to verify the immigration status of their workers under which those found to be illegally staying in the country and their supporters (who provide aid) will be subjected to felony prosecution (Babington, 2006).

The Senate, however, passed a more lenient immigration bill that calls for a construction of a shorter 371 mile triple-layer fence along the Mexican border, but established a “complicated three-tiered system for determining who, among those illegally staying in the county, can stay and who must leave the country (Babington, 2006). Specifically, this system is based on the immigrants’ length of stay in the country where those that can prove that they have been here for five years and longer can apply for citizenship as long as they “pay back taxes, learn English and have no serious criminal records” (Babington, 2006). Those that have been in the country from two to five years will be asked to apply for a green card outside the U.S., which nonetheless would allow them to immediately return to the U.S. Those that have been in the U.S. illegally for less than two years will be automatically deported to their home country. This last provision is expected to affect 2 million out of the estimated total of 12 million illegal immigrants in the U.S. today. Nonetheless, the Senate bill would somehow allow majority of the illegal immigrants already in the country to remain and eventually earn U.S. citizenship. Moreover, the Senate bill provides for some 200,000 new temporary guest-worker visas a year and creates a separate guest worker program for immigrant farm laborers.

As of this date, there has been no compromise between these two contrasting approaches taken by the House and the Senate towards the immigration issue. A spokesperson from the Senate has hinted on the postponement of the negotiations to reconcile the bills and instead focus on the establishment of firmer border security and stricter enforcement of worksite legislation (Heneroty, 2006).

Regardless of the outcome of the House-Senate negotiations, the conditions in the farm labor market are expected to change radically. Any version of the Immigration Bill will affect an estimated 12 million unauthorized immigrants, 40% of whom are hired as farm workers (Seid, 2006; Levine, 2004). These illegal workers are mostly “poorly paid and poorly treated” (Smith, 2005) usually hired at wages below prevailing market rates. Their displacement under the House version of the Immigration Bill will expectedly create labor shortages, which can be remedied if farm labor wages are increased significantly to attract workers from other industries. On the other hand, the legalization of the immigration status of most of these workers under the Senate version of the Bill will enhance their bargaining position to demand for better wages at or above prevailing market rates, in addition to the usual fringe benefits (insurance, bonuses and others) and better working conditions they deserve. An economist from the American Farm Bureau, for instance, estimates that the immigration reform can push farm wages from the current average of $9.50 per hour to about $14.50 an hour as farms are constrained to hire lower-wage workers for low-skilled jobs (Seid, 2006). He foresees that the ultimate effect of all these immigration reforms is to raise commodity prices from 5% to 10% as farm businesses pass on the burden of higher labor costs to the consumers.

This project was designed to determine the organic and conventional farms’ strategic responses to changes in the farm labor market conditions arising from stricter implementation of immigration policies. These expected business strategies can include labor input substitution (where hired labor can be replaced with more family labor hours) and farm size adjustments (where certain farms might consider downsizing of operations to levels affordable by the farm business’ capability to hire farm workers without sacrificing profitability and overall business viability). These two probable responses can influence decisions made in other areas such as the choice of crops to grow, production methods to be implemented, the feasibility of other non-farm activities generating supplemental incomes, among other possible business strategies. This project will elicit information on these strategic plans and their repercussions on the farm business. Given the strong relevance and urgency of the farm labor issue, this project is envisioned to cater to the research and information outreach needs of the organic farming sector.

Cooperators

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  • Timothy Park

Research

Materials and methods:

This project employed both quantitative and qualitative research techniques. As a precursor to this project’s own quantitative research and analytical approaches, this project initially relied on the data on the U.S. organic sector gathered by the Organic Farming Research Foundation (OFRF), a private research organization in the United States. This project’s survey instrument was developed partly by replicating portions of the OFRF survey questionnaire relating to farm labor demand and supply issues. Moreover, gaps in the existing OFRF survey questionnaire were identified and introduced in this project’s survey instrument.

A survey among organic, transitioning, and conventional farms in Georgia, North Carolina, South Carolina, Alabama, and Mississippi was conducted in late 2007. Target respondents of about 520 farms were identified through contacts with organic farming associations, commodity groups and local USDA agencies. A survey questionnaire, which was mailed to the target respondents, contained questions designed to gather information on the farms’ labor requirements and how these requirements have been previously and are currently met by the respondents. Among the labor-related information collected were data on actual and expected decisions on the substitution of family with hired labor (or vice versa), employment of full-time versus part-time workers, and seasonal versus year-round hiring of farm labor. Additional information were also be collected on business strategies that either complement or supplement labor-related decisions in order to maintain or enhance the farms’ profitability and viability potentials under the new labor market conditions. These information include changes in the production profile and allocations (or enterprise mix), farm size adjustments, and modifications of investment decisions (farm versus off-farm activities). Also, labor-related measures such as wage rate estimates paid to previous and current farm workers were collected, along with the respondents’ expectations on the wage scenario under the immigration reform.

The survey collected information on the structural, demographic and financial attributes, such as education, operator’s age, and family size.

Qualitative research methods were used to address the third objective. Interviews with several farmers were conducted during the summer of 2009. These farms were identified with the help of some university and industry specialist contacts and were chosen based on the farms’ willingness to participate in the study. These farms represented pairs of conventional and organic farms producing a common commodity (blueberry, peanuts and soybeans). Case studies were developed from these interviews to present information on farm labor management conditions and strategies that will complement and supplement data gathered from the survey.

Meanwhile, this project’s major proponent collaborated with a doctorate student and professor from the School of Ecology who conducted a 3-year experiment on a farm in Athens, GA. The experiment involved 10 different farming systems that employed alley cropping, organic and conventional farming methods for some vegetable crops. While the experiment’s major concern was carbon sequestration, detailed records of farm production costs were maintained, including information on family and hired labor inputs. Enterprise budgets were developed for these farming systems, which allowed for the analysis of variations of farm labor management strategies.

Econometric and statistical methods were used to analyze survey data collected. The Ecology farm project used the enterprise budget analysis framework and stochastic dominance techniques to identify dominant production methods. Instrumental probit and seemingly unrelated regression models were used to analyze survey data. Another used the translog production function model to analyze technical efficiency effects of labor constraints.

Research results and discussion:

A. Summary of Survey Results

Survey data compiled from 84 respondents provided a number of interesting results/trends on the general production profiles of organic and conventional farms, as follows:

o There appears to be not much variation in the distribution of conventional and organic farms across the various business organizational structures. Majority of the farm businesses in the survey sample (69% or more) are organized as single proprietorships. The rest are classified as either partnerships or corporate entities.

o Organic and conventional farms have about 58% to 60% of their operators working full-time on the farm. Percentage-wise (calculated within each gender class), female farm operators tend to work full-time on the farm (61%) compared to 54% of the male farm operators who are willing to do so.

o The survey results establish the size dominance of conventional farms over organic farms in terms of gross farm incomes (GFI) in 2006. Conventional farms registered a mean GFI of $200,192 compared to only $34,969 for organic farms. Organic farms, however, are more dependent on their farm operations as only their farm operators devote only an average of 36% of their time to off-farm employment and/or income-generating activities. Their conventional farm counterparts devote 44% of their time in similar gainful activities outside the farm.

o Conventional farms tend to be significantly larger in size than organic farms. Conventional farms in this sample have an average farm size of 386 acres while organic farms operate an average of 27 acres.

Salient characteristics of these farms’ labor profiles are summarized below:

o Organic farms in this study have, on the average, hired more non-family workers (mean of 75) than conventional farms, which hired an average of 41 non-family workers. Organic farms also have hired more full-time and part-time workers, on average, as reflected by their means of 60 and 26 workers, respectively, compared to conventional farm’s mean hiring rates of 23 and 12 workers, respectively. Mean year-round employees for organic farms is 61 employees compared to 28 for conventional farms. Organic farms also hire more seasonal workers, with an average hiring rate of 26 workers compared to 7 workers for conventional farms.

o Conventional farms have significantly larger households, with a mean size of 3 members compared to 2 for organic farm households. In breaking down the nature of family members’ employment in the farm, the average numbers of workers employed full-time year-round in both conventional and organic farms are not statistically different. However, mean year-round part-time employment and both full-time and part-time seasonal employment figures are larger for organic farms vis-à-vis those of the conventional farms. Organic farms also produced significantly larger mean values for all employment categories (year-round and seasonal, full-time and part-time) than conventional farms.

o In almost all enterprise groups, except for pasture, organic farms require significantly more man hours of farm labor (on average) than conventional farms. In terms of numbers of workers, organic farms tend to hire more non-family workers to supplement labor supplied by family members. They also maintain larger worker bases for full- and part-time labor as well as year-round and seasonal employees.

The farms’ responses to survey questions on their expectations on the effects of stricter immigration policies on farm labor market conditions are summarized below:

o As to the farmers’ previous labor hiring experiences, 28% of our sample conventional farms never experienced any difficulty in hiring workers to complement their existing family farm labor. The comparative proportion for organic farms is quite close at 32%. However, sixty-seven percent (67%) of both conventional and organic farms declared that they had experiences of difficulty in hiring such workers, with the severity of the problem ranging from periodic (“sometimes”) to constant (“always”) frequencies. In both farm groups and in these three categories with experiences of difficulty (“sometimes” to “always”), the periodic (“sometimes”) difficulty category comprises about 30% to 33% of the respondents in their respective farm types.

o When asked about their expected effects of immigration policies on farm labor supply conditions (providing either Yes or No answers), the most popular answer in both farm groups revealed some farmers’ expectations for significant changes to happen in the farm labor market (38% of conventional farms and 28% of organic farms). Combining the first two response categories, 50% of conventional farmers recognize a linkage between new (stricter) immigration policies and farm labor supply conditions. As for organic farms, 44% chose either of the two “Yes” categories. On the other hand, 20% of conventional farms and 16% of organic farms do not foresee any immigration policy effect on farm labor supply while 35% of the entire survey sample did not express an opinion about any relationship between immigration policy and farm labor supply.

o The survey participants’ preferences for specific business strategies provide interesting implications that can be associated with certain structural differences between organic and conventional farms. The most popular business strategy for conventional farms (18.57%) considers an input substitution scheme where more machinery will be acquired to reduce labor requirements in the event of a farm labor hiring (or shortage) problem. This perhaps reflects the conventional farms’ more mechanized (machine-dependent) existing operations that made them more familiar with this strategy. Conventional farms in this sample have been in business operation much longer than the more newly established organic farms. Farm experience and greater financial flexibility (resulting likely from their size and scale of operations) provide these farms then with the capability to consider more capital investments.

o The respondents in this farm category also considered downsizing of farm operations as the 2nd most popular strategy (17.14%). This is a logical result considering that conventional farmers usually operate much larger operations (vis-à-vis their organic counterparts) and, thus, can consider size adjustments to achieve the right combination of minimized inputs and optimized farm production.

o On the other hand, the most popular strategy for organic farms is production diversification (i.e. changing production plans to less labor-intensive commodities). Organic farms are structurally more diversified as their farms are usually planted to various types of fruits and vegetables. The need for regular crop rotation practices to enhance soil productivity expose these farmers to various production (or crop choice) options.

o Both organic and conventional farms also consider relying on family members to increase their participation in the farm business when extra help from non-family workers cannot be obtained.

o On wage effect expectations, almost half of the entire sample (49%) did not provide an opinion on the relationship between new (stricter) immigration policies and wage rates. For those with opinions or expectations, about 10% do not see any wage effect resulting from constricted farm labor supply due to immigration policies. On the other hand, 30% of conventional farms and 26% of organic farms expect significant wage rate adjustments. The combined proportions of farmers that expect either significant or slight farm wage rate adjustments that can be provoked by immigration policies are 43% of conventional farms and 40% of organic farms.

o About 41% of conventional farms expect reasonable adjustments in farm wages due to the supply effect of immigration policies in the farm labor market. Of these respondents, 41% (or 18% of all conventional farms) think that the adjustments are affordable while 59% (or 25% of all conventional farms) expect the changes to be unaffordable.

o As for organic farms, 39% of them indicated their expectations for reasonable farm wage adjustments. These respondents are equally split in their views about the affordability of the farm wage adjustments.

o Among conventional farms, 15% expect the wage adjustments to be unreasonable, with an equal share for those with opposite views on the affordability of the wage rate adjustments. Twelve percent (12%) of organic farms expect unreasonable wage rate adjustments and all of them indicate their affordability of such adjustments.

o As in the farm hiring strategies, conventional farms are more inclined (21% of this group) to consider input substitution strategies that will make their operations more capital -intensive. Production diversification strategies are again popular (18% of the group) among organic farms in the event that farm wage rate adjustments are experienced due to leaner farm labor supply caused by immigration policies.

o Organic farms maintain their preference (14% of the group) for substituting family labor for hired, non-family labor. Conventional farms, on the other hand, also consider other less labor-intensive production methods (19%) and downsizing strategies (18%) to cope with wage adjustments.

B. Summary of Case Study Results

The case studies confirmed most of the survey findings. The following recurring themes were noted in the case study results:

? The hiring of “motivated “labor is a common issue to both conventional and organic farms.

? More mechanized or capital-intensive farms (usually conventional farms) are less stressed in dealing with farm labor hiring issues.

? Family labor has always been the source of reliable farm workers.

? “Motivated” labor can only be lured into farm employment by offering highly competitive compensation packages, which will erode farm profits.

? At times, however, even an offer of higher wage rates and benefits could not attract workers willing to perform “menial” farm tasks that illegal foreign workers used to perform.

The organic and conventional blueberry farms offered the following opinions on the expected immigration effect on farm labor market conditions:

On expected changes in farm operations if labor market conditions change as new immigration policies restricting availability of some farm workers are enforced

• Yes, both blueberry farms expect changes.
– However one will continue to hire hand pickers while the other plans on becoming more mechanically oriented and less labor intensive.

• Both will have to become more competitive in prices in order to attract workers.

• One farm says they will have to go to the H-2A employment program to hire workers.
– This will require setting up boarding facilities, increased wages for workers and other H2A requirements.

On expectations on wage rates demanded by workers for hire

• Wage rate adjustments are expected: if the H-2A is adopted then wage rates will certainly increase.

• Since one farm is mostly labor oriented, they will have to increase wages to compete for labor.

The peanut and soybean farmers provided the following opinions/responses to the same questions:

On expected changes in farm operations if labor market conditions change as new immigration policies restricting availability of some farm workers are enforced

• Farms W and P are mostly capital-intensive in their production and harvest operations. Both farms do not foresee any changes when it comes to labor for their operations.

On expectations on wage rates demanded by workers for hire

• There has not been a problem in finding labor in the past and they cannot foresee that changing with new immigration policy. There has, however, been a problem finding motivated labor.

C. Technical Efficiency Study Results

Results of a technical efficiency study that utilized the survey data collected in this project indicate the following:

o The number of adjustment strategies adopted is positively related to income. There is also evidence of productivity difference between the group of farmers which adopts at least one strategy and the group that has zero strategy. Summary statistics further showed that the former group has higher mean farm income.

o The different production function models allowed for the evaluation of what strategy/ies are most likely to be the most effective when farm labor market conditions change. Among the adjustment strategies, adjusting wages and nonwage benefits have been determined to be the most effective strategies to cope with labor shortages. The results however suggest that adopting a combination of strategies is recommended.

? For example, while relying on own labor adjustment alone will not suffice in dealing with labor shortage. Doing this in addition to adjusting the compensation package for nonfamily labor will off-set the increased farm production costs from raising wages for those nonfamily workers that the farm want to attract or retain.

? Also, adjusting compensation while at the same time adjusting farm practices could prove to be an effective strategy in order to retain and attract labor during much needed periods while the time lagged positive effects of adjusting farm practices will also be realized in the long run.

? Providing additional benefits aside from regular wages has a significant positive impact on organic farm income. This implies that adjusting compensation does not have to translate to significant increase in wages.

? Furthermore, these additional benefits suggest better working condition which encourages good job performance that will eventually translate to higher farm productivity.

D. Hiring Difficulty Study Results

Using the same survey data, another study employed instrumental variable probit estimation techniques to identify determinants of hiring difficulties encountered by farmers. This study produced the following results and conclusions:

? The hiring predicament is cushioned by the greater involvement of farm household members in farm work. The probability of experiencing hiring difficulties is also influenced by the structure of farm employment and the nature of farm work requiring non-family and/or part-time (seasonal) workers. Certain farm operations such as pre-processing and marketing seem to be more attractive work for potential farm workers, although this study’s results do not provide succinct evidence that other operations (especially planting and harvesting) are less desirable.

? More importantly, this study’s results provide evidence on the significance of size in enhancing the probability of experiencing the hiring impediment. Smaller farms, apparently financially handicapped to employ more capital-intensive operations, end up with more labor-intensive farming methods that make them more susceptible to confronting the labor hiring impediment.

? Moreover, this study’s results do not provide any discriminating evidence on the effect of organic farming methods on hiring difficulties. Instead, the hiring experience becomes a significant impediment to small (and thus labor-intensive) farms, possibly constrained by the optimal employment of household members in farm work, that are in need of workers for less preferred farm activities, regardless of whether these farms are predominantly organic or not.

E. Farm Labor Decisions in Dominant Production Systems Study Results

Another study utilizing the results of experimental trials for a number of alley cropping (AC), organic (OST) and conventional (CT) farming systems conducted through the School of Ecology produced the following findings:

? Treatments AC2, OST2, OST1 (OST + mulch) and AC3 had the highest net returns per family labor man hour (FLMH). In this analysis, the first three of these four treatments had the lowest labor requirements due to the presence of mulch, which suppressed weeds and reduced weeding labor. Additionally, these treatments ranked in the top four (stochastically dominant methods) in net returns, exclusive of labor costs. Altogether, these two conditions produce better risk-efficiency rankings for these alternatives in terms of net returns to family labor. The existing literature presents contrasting results regarding the profitability of organic farming systems when considering both the increased labor requirements and organic price premiums. Some claim that reduced input costs, high price premiums, and endurance under drier conditions have enhanced organic farms’ relative profitability. Other studies, however, doubt their advantage due to higher labor costs. As reviewed by Friedman, the production costs of organic apples in California were 10 percent to 25 percent higher than conventional farms as a result of higher material and labor costs. In contrast, in a potato study in Idaho involving 18 conventional and organic farming systems, the average material costs were lower among organic farms while labor costs were higher. In this study, the stochastic dominance analysis of the net returns to family labor parameter clarifies our findings across the three study years, and ranks most of the organic systems consistently higher than the conventional system on this highly degraded soil.

Participation Summary

Educational & Outreach Activities

Participation Summary:

Education/outreach description:

A. BULLETINS

These bulletins that report the survey results are available in hard print (upon request from the project proponent) and online at http://www.ces.uga.edu/Agriculture/agecon/pubs/manage.html. The availability of these publications have already been announced to the organic farm associations and the fruit and vegetable associations in Georgia, North Carolina, South Carolina, Alabama, and Mississippi. The UGA county agents have also been informed about these publications in case these are needed to answer certain client inquiries on this matter.

1. F.I. Santos and C. L. Escalante. “Farm Labor Management Decisions of Organic and Conventional Farms: A Survey of Southeastern Farm Businesses.” Department of Agricultural and Applied Economics, University of Georgia, AGECON-10-001, January 2010.

2. F.I. Santos and C. L. Escalante. “Farmers’ Business Expectations and Strategies under Immigration-Related Changes in Farm Labor Market Conditions: A Survey of Southeastern Organic and Conventional Farm Businesses.” Department of Agricultural and Applied Economics, University of Georgia, AGECON-10-002, January 2010.

B. CASE STUDIES

1. S. L. Perkins. “Miles Blueberry Farm.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

2. S. L. Perkins. “Sunny Ridge Farms.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

3. S. L. Perkins. “Perkins’ Soybean Farm.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

4. S. L. Perkins. “Perkins’ Peanut Farm.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

5. S. L. Perkins. “Walker Soybean Farm.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

6. S. L. Perkins. “Walker Peanut Farm.” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

7. C.L. Escalante. “Horner’s Blueberry Farm” Department of Agricultural and Applied Economics, University of Georgia, Fall 2009.

C. CONFERENCE PRESENTATIONS (PAPERS AND POSTERS)

1. Perkins, S.L. and C. L. Escalante. (Selected Conference Poster) “Hiring Unskilled Workers for Conventional and Organic Farm Labor: Who Gets Hurt When the (Unskilled Foreign) Workers are Gone?” 2010 Southern Agricultural Economics Association Annual Meeting, Orlando, FL, February 2010.

2. Jacobsen, K., C.L. Escalante, and C. Jordan. (Contributed Conference Oral Paper) “Turning red clay brown: The effects on soil quality and economic tradeoffs of restorative agricultural systems in the Deep South.” Proceedings of the 94th Ecological Society of America Annual Meeting. August 2009.

3. Santos, F.I., T. Park, and C.L. Escalante. (Selected Conference Paper) “The Impact of Labor Constraints on Farm Performance.” Journal of Agricultural and Applied Economics (Proceedings Issue for the 2008 Southern Agricultural Economics Association Annual Meeting) 41,2(August 2008): 537.

4. Escalante, C.L. and C. Neely. (Selected Conference Poster) “Settling where the jobs are, thriving where the grass grows.” Journal of Agricultural and Applied Economics (Proceedings Issue for the 2008 SAEA Annual Meeting) 40,2(August 2008): 738.

5. Escalante, C.L. and F.I. Santos. (Accepted Contributed Conference Paper) “The Farm Labor Hiring Predicament of Organic and Conventional Farm Operators in the Southeast.” International Conference on Business and Information, International Business Academics Consortium, Kitakyushu, Japan, July 5-7, 2010.

6. Escalante, C.L. and F.I. Santos. (Conference Paper Proposal submitted, awaiting approval) “The Unskilled Farm Labor Hiring Challenge for Organic and Conventional Farms in the Southeast.” 4th World Congress of Environmental and Resources Economists, Montreal, Canada, June 28-July 2, 2010.

7. Santos, F.I. and C.L. Escalante (Selected conference poster accepted for presentation). “Differentiation in farm labor complement profiles of organic and conventional farms in the Southeast.” 2010 Agricultural and Applied Economics Annual Meeting, Denver, CO, July 2010.

8. Wu, Y. and C.L. Escalante (Selected conference poster accepted for presentation). “”Foreign Workers and the Organic Farms’ Demand for Seasonal Unskilled Labor.” 2010 Agricultural and Applied Economics Annual Meeting, Denver, CO, July 2010.

D. PEER-REVIEWED JOURNAL ARTICLES

1. Jacobsen, K.L., C.L. Escalante, and C.F. Jordan. “Economic Analysis of Experimental Organic Agricultural Systems on a Highly Eroded Soil of the Georgia Piedmont, USA” Journal of Renewable Agriculture and Food Systems (Revise and Resubmit status)

2. Escalante, C.L. and F.I. Santos. “The Farm Labor Hiring Predicament of Organic and Conventional Farm Operators in the Southeast.” Journal of Agribusiness (under review)

3. Santos, F.I., T. Park, and C.L. Escalante. “The Impact of Labor Constraints on Farm Performance.” Journal of Agricultural and Applied Economics or Journal of Agricultural and Resource Economics (finalizing manuscript for submission)

E. OTHER ONGOING OUTREACH EFFORTS

Additional popular media articles are being finalized for dissemination through several outlets, such as the FACES magazine of UGA’s College of Agricultural and Environmental Sciences.

After the journal article on the collaborated research with the School of Ecology is finally published (i.e. peer review has been completed), negotiations will be made with Ecology for the online publication of the enterprise budgets generated from the experimental farming systems.

Project Outcomes

Project outcomes:

As a starting point in the discussion of the impacts of this project, let us consider the current state of the organic farming industry. In the past decade or so, the organic farm sector has been hailed as the fastest growing segment of the farm sector as consumer awareness of organic products’ health and ecological or environmental benefits increased and demand for organic products increased significantly. However, even as revenues from organic produce sales have increased rapidly during the past several years, the organic farming sector has really not expanded considerably to adequately meet market demand. As a result, occasional supply deficiencies have plagued certain marketing channels.

In the search for answers to explain the inadequate supply response of the organic farm sector, the slow conversion of farmland to organic farming operations has been cited as an important factor in the sector’s inadequate production response. This project, however, uncovered another possible source of impediment to business expansion through the farm labor hiring constraint experienced by farm operators, especially by the more labor-intensive organic farms. This project contends that the farm labor hiring constraint will be expected to worsen as stricter immigration policies constrict the supply of farm workers by deporting illegal aliens.

The results of this project’s survey confirm and establish important structural parameters that will help explain the hiring predicament of organic and conventional farms. Organic farms are relatively smaller in income and acreage than their conventional farm counterparts, but are more labor-intensive. There is not much difference in the number of family members working in organic and conventional farms, but the latter farms have larger households (more family members). Thus, the more labor intensive organic farms rely more on hiring non-family workers. This therefore sets the stage for our contention that should the farm labor supply experience significant constriction, organic farms will be more vulnerable to such constraint.

The same survey results confirmed the apprehension of more than 50% of the respondents, from both conventional and organic sectors, about the effects of immigration laws on farm labor market conditions. As majority of the respondents in both groups had experienced hiring difficulties in the past, 44% to 50% of the farmer respondents recognized the linkage between immigration policies and farm labor market conditions. In other words, these farmers expect their hiring experiences to become even more challenging. Some farmers are able to foresee the effects of such policies on wage rate adjustments. What options then are open to these farmers when the foreseen policy effects become realities? Conventional farms might consider an input substitution scheme where more machinery will be acquired to reduce labor requirements in the event of a farm labor hiring (or shortage) problem. They also consider downsizing of farm operations as an alternative strategy. On the other hand, organic farms opt for product diversification that possibly could entail less demand for labor. Both farms also will rely more on family members devoting more time to farm work.

These choices of business strategies clearly indicate the influence of differentiated structural conditions. The conventional farms’ size advantage allows them to consider more mechanized (machine-dependent) production alternatives that can be quite infeasible for organic farms to adopt. Greater reliance on family members can be a remedy if the entire farm household’s working capacity has not been fully exhausted yet.

The case studies elucidate more clearly such predicament. Families of organic farm operators shared their difficulties in hiring non-family workers to say, harvest their crops that were already in the advanced maturation stages and had to harvested as quickly as possible. Hiring, they said, has become even more difficult with the illegal aliens gone. Nobody could withstand the summer heat and harvest their crop, even if they offered wages past their break-even rates. Only the illegal aliens, they said, had the guts and patience to do such kind of work. Their household’s working capacity has already been exhausted. Their children have quit school and together with them have been working full-time on the farm.

The H2A option was considered, but given their financial conditions, they could not afford the demands or requirements of the program (housing, food, wage and other benefits set at a high threshold).

Both farmers and researchers will benefit from this study’s results. This project’s studies offer some insights and explanations of these issues. For instance, the technical efficiency study establishes the synergistic effect of combining several business strategies to attain the desired efficiency effect. Moreover, the study contends that the ability to recognize effective adjustment strategies on times of unfavorable and changing market conditions suggests better management/entrepreneurial skills, which is an important determinant of farm efficiency. Also, the enterprise budgets generated from the experimental farming systems, once made available online, can be used to model scenarios involving various strategic plans.

The outputs from this project can help farmers understand the options (including possible business strategies) available to them when their businesses are affected by changing market labor conditions. The farmers can make well-informed decisions on these strategies as this project can help them better understand what strategies will be most appropriate to their peculiar operating conditions.

The survey and case study data collected in this study, though relatively not as extensive as the OFRF survey data, for instance, would somehow offer researchers additional information and insights on farms’ labor profiles, hiring constraints and other issues not usually covered by more extensive datasets available elsewhere. These should provide a good motivation to increase efforts in research on organic farming and other sustainable farming activities.

Economic Analysis

Though the project proponent was involved in the economic analysis of alternative cropping systems (alley cropping, organic and conventional experimental plots) that the School of Ecology has undertaken, such field experiments are not an integral part of this project that focuses on farm labor management. This project was interested solely in the farm labor management implications of such different experimental farm systems. The enterprise budgets (reflecting various farm labor management decisions) that were developed from those experiments are attached for further reference.

Farmer Adoption

This project’s outputs do not directly recommend adoption of new technologies or production methods, but only suggest certain farm labor management strategies that farmers may consider. Bulletins summarizing survey results on issues in business strategy decision-making as well as proven and intended operating strategies have been disseminated to organic farming associations as well as fruit and vegetable commodity groups in Georgia, North Carolina, South Carolina, Alabama, and Mississippi. These can also be easily accessed as these have been made available online in the university’s Extension Agricultural and Applied Economics website. The enterprise budgets from the School of Ecology’s experimental farm system trials will be published after peer reviews have been addressed and the budgets are finalized. Further outreach efforts will be pursued even after the grant has expired. For instance, some popular media articles are being arranged to be published and plans are being made to make presentations to some annual conferences of farming groups next year, such as the Georgia Organics annual conference.

Recommendations:

Areas needing additional study

A recurring issue brought up by farmers is the difficulty in sourcing farm workers to perform tasks traditionally done by (illegal) foreign workers. Offering highly competitive wage rates often did not work as potential workers shunned away from “difficult, more menial” farm work. The H2A program has been mentioned by some as an alternative. However, recently the government introduced certain modifications in the program that some farmer groups consider as adversarial to farm businesses. The H2A program deserves to be scrutinized to evaluate its effectiveness in helping farmers resolve their hiring problems. A study that will identify sources of difficulty in farmers’ adoption of the H2A program can be used to suggest certain policy modifications, if at all necessary.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.