The Sustainability of Organic Farms Under the H2A Program: Evaluating the Program's Effects on Mitigating Farm Labor Shortages and Maintaining Business Viability

SURVEY RESULTS

The survey results provided valuable information with important implications on the current state of the H2A program. The 46 respondent farms accounted for a total of 389 applications filed during the past several years for about 6,800 H2A working visas. Of that total applications, about 6,600 visas were approved (96.85 approval rate) covering a total of around 640 worker months.

Nature of Demand

Farmer respondents provided specific indications on where H2A workers are being utilized for. It seems that H2A workers are most needed by farmers during harvesting and production or planting work stage of farm activity (35 and 29 response counts, respectively). Farmers are more active in applying for H2A workers during harvest season as it tallied the highest average frequency of applications filed (5.6 times). Processing (value-added production) stage requires the most number of H2A workers as farmers requested the largest number of workers during this stage. Pre-production/pre-planting work stage tallied the highest H2A work months approved (7.6 months).

Timing Issues

The period from approval to the arrival of the foreign workers seems to have taken the longest waiting time. Responses indicate that 43.5% needed to wait between 31 to 60 days before foreign workers arrive after their application had been approved. The waiting period between filing and approval of their application, however, was shorter. 40.9% of the farmers indicate that this waiting period only took 11 to 30 days. The preparation of the application documents seems to have required less time as half of the respondents indicate that they finished this activity within 1 to 5 days. Majority of the sample who provided an assessment (95.8%) stated that the time devoted for their H2A applications actually did not disrupt the implementation of their project.

Documentary Requirements and External Assistance

More than half (58.3%) of the respondents consider the documentary requirements as "reasonable" while 30.6% contend that these are "unreasonable." More than three-fourths (76.9%) have obtained the assistance of an external agent in the preparation and filing of their H2A applications.

Cost Considerations

The survey participants provided a general indication of the cost of hiring and the resulting productivity of the hired H2A workers. Majority of the respondents have realized an increase in the cost of hiring to some extent. Among the respondents, 21.9% estimated that the cost of hiring increased by more than 100%. A quarter (25%) of the sample indicate that a cost increase ranges from 50% to 100%.

Even though hiring of H2A workers has increased the costs for most farmers, it also helped to increase their productivity. Among the respondents, 53.2% of the sample indicate that productivity has increased to some extent (from 25% to more than 50% improvement). Interestingly, about one-third of the respondents (34.4%) state that hiring of H2A workers does not affect overall worker productivity while 12.5% of farmers reported a decline in productivity by less than 25%.

A majority of farmers indicate that business profits improved after hiring H2A workers. 51.6% of the respondents increased their overall business profits by 25% to over 50%. On the other hand, 15.2% of the sample state that hiring H2A workers has left their business profits unchanged. Meanwhile, one-third of the sample (33.3%) reported that that hiring H2A workers even decreased their net business profits by almost 50%.

Wage Considerations

A majority of the survey participants perceive the resulting wage rate they pay to their H2A workers as excessive. Among the respondents, 90.3% indicate that the prevailing Average Effective Wage Rate (AEWR) is not affordable. Only 9.7% of the respondents think otherwise.

MAJOR RESULTS FROM THESES AND JOURNAL ARTICLES

Xueqian Lu’s thesis analyzed the impact of county and state level immigration laws on H-2A applications in the Southeast region, controlling for a variety of macroeconomic variables. H-2A farm work visas are ideally needed by farm business owners to fill in their requirement for agricultural workers, but many farm employers contend that the processing period is too long and too complicated that the program has not effectively addressed their needs (CBS Money Watch, 2010). The study analyzed the possible effects of immigration laws on H-2A visa applications based on individual H-2A application cases from Southeast region from 2006 to 2014. The study finds that state-level strict immigration laws actually have a negative effect on number of H-2A visa applications. This possibly suggests that farm employers could have considered shifting to the production of crops that are less labor-intensive, or could have employed more machines as a substitute for the inadequate labor input. Also, illegal workers who may have migrated to other areas may not want to come back to their adopting county due to fear of being deported. Thus the state-wide law has not increased the total number of H-2A visa application as expected. In addition, the unemployment rate of the previous year has a positive effect, which could possibly reflect the situation of farm workers in the U.S. where even the unemployed domestic residents are reluctant, they do not want to work in the agricultural sector, possibly because of the relatively tough working conditions and the sector’s usually low wage rate.

Odeidra Williams’ thesis research addresses two important issues raised by this research project. First, does the H2A program indeed serve as a reliable farm labor sourcing alternative after the undocumented workers have been displaced from farm employment?  Preliminary results indicate that the program’s effectiveness in addressing the gap is still far from being acknowledged as a significant source of replacement labor.  Second, does the H2A program help in enhancing the viability of farm businesses, especially smaller farms (a category that organic farms belong to)?  Preliminary results indicate that farm businesses are actually relatively more economically better off when NOT hiring H2A workers because of cost considerations.

Several journal articles also evaluate issues directly and indirectly related to H2A labor hiring decisions of farmers. These studies provide extensions to important issues, such as employee turnover, health benefits, health access and status, and environmental factors related to labor-input substitution decisions involving H2A workers.

The employment turnover study (Luo and Escalante, ELRR) focuses on the constrained employment choices of undocumented farm workers, who undoubtedly still remains a significant source of farm labor inputs. The study primarily lays out the constrained employment choices of such workers that are supported by the reality that these workers are usually deprived of basic employment rights stipulated by existing labor laws, given their employers’ gross violations in the form of unreasonably low wages, lack of benefits, and unacceptable working conditions, among others, that could not be reported to proper authorities. Even legal workers are difficult to retain in farm positions. The farm industry’s high labor turnover rates can be attributed to several factors. Relative to the nature of manual work in the manufacturing, service, and other non-farm industries, farm operations involve more physically strenuous labor under working conditions that usually pose serious health risks (Calvin and Martin 2010; Escalante, Yu, and Li 2016).  Even with such work demands, farm workers do not receive commensurate compensation as farm wages and benefits are hardly competitive with those offered by non-farm businesses (Emerson 2007; Kandel 2008; Escalante, Perkins, and Santos 2011).

The results of the farm labor turnover study only elucidate the significant relevance of H2A farm workers program that ensures acceptable and competitive wages, in addition to regulated working conditions that comply with decent working standards. The H2A could be a remedy to the farm labor turnover problem.

The EPHB study (Luo and Escalante, AFR) is a follow-up to the farm labor turnover study that focuses on health benefits. As existing federal laws assure documented workers of insurance benefits in businesses with more than 50 full-time workers in other industries, these workers’ employment decisions are more influenced by wage differentials, work demands, and workplace conditions between farm and non-farm employer firms. However, the study’s results for undocumented farm workers suggest a higher elasticity effect as these workers were found to increase their actual farm work days upon acquiring EPHB incentives while also affecting their farm employment expectations. These results provide more interesting implications.  First, employers in general are not mandated by law to provide undocumented workers with EPHB, except for compensation for job-related injuries and accidents.  Thus a farm employer can effectively use EPHB as a retention strategy for these workers.  Under this arrangement, these workers evaluate the farm employment package with EPHB and relatively more inferior wage rates against a higher paying job in another industry, possibly without an EPHB feature in the compensation package.  The farm employers, on the other hand, evaluate trade-offs between incurring incremental expenses in offering EPHB and business viability realized more through increased labor productivity that undocumented workers can be relied on to deliver.

As related to the H2A farm labor program, H2A workers are assured the same health benefit privileges as documented farm workers. Hence, the results of this study should offer some important suggestions for reinforcing the offering of health benefits with other work incentives to hired H2A workers.

Two studies (Luo and Escalante, EJHE; Ghimire, Escalante, and Ghimire, ongoing) also focus on health access and health payment arrangements of various classes of workers. The former study takes on a more general perspective on the worker categories while the latter specifically isolates the H2A workers as a separate worker category.  These studies produce interesting patterns of access, choices among alternative health care service providers, and the resulting payment arrangements adopted.  The H2A workers generally enjoy better access and are more financially capable in affording better health care services.  These results provide even stronger evidence that uplifting workers’ overall welfare is an important goal of the H2A program.

Another study (Pena-Levano, IFAMA paper presentation) takes on different perspective as it introduces environmental factors. The paper establishes connections between labor hiring decisions in the livestock sector and climate change. It argues that since livestock contributes significantly to greenhouse gases emissions across its production chain, its business decisions will be influenced by mitigation policies that target emission reduction.  Its results suggest that as the livestock sector is affected by climate change, land needed for agriculture due to overall decreases in crop productivity will be affected by the imposed carbon tax rate, changes in real income and private consumption pattern, and biofuel policies. One of the most prominent consequences is that due to the less productive land, more capital investment and labor is required, especially for the livestock industry which is a labor-intensive sector. US labor cannot be satisfied locally, many industries require about 50% increase in labor in many sectors, which cries out for the need of labor coming from other regions such us Latin America under the H2A program.

 ECONOMIC ANALYSIS

 A number of analytical approaches were employed in several studies conducted under this project. These studies primarily establish the justifications for the H2A program while, at the same time, discuss the economic viability and profitability effects on businesses.

The employment turnover study employed fractional multinomial logit estimation techniques to analyze time allocation decisions of U.S. farm workers.   Results indicate that green card farm workers tend to allocate fewer workweeks to farm employment than citizens and undocumented workers, in favour of better opportunities in the non-farm sector. There is evidence of an assimilation effect, whereby undocumented workers also tend to re-allocate their time from farm to non-farm employment as their residence tenure increases, even though they experience constrained mobility and visibility during periods of strict immigration control. In the context of employers' violations of the existing labour laws that currently protect even the rights undocumented workers, such turnover decisions seem justified. The findings raise concerns about whether any governmental effort to legalise the immigration status of such workers would reduce farm job turnover rates and increase farm employment retention, so long as labour standards are not enforced. Moreover, external economic shocks could more easily induce citizen and green card farm workers to abandon farm employment, whereas undocumented workers tend to remain in their farm jobs during such difficult times. This study’s results only strengthens the need for contractual employment through the H2A program as the reliable solution to the issues raised in this analysis.

Another article investigates the impact of EPHB on labor supply decisions of workers in agriculture. This analysis is enhanced by the immigration status angle that allows for the comparative evaluation of the effectiveness of the EPHB incentive on documented and undocumented farm workers. These two perspectives provide a better understanding of labor supply decisions while providing indirect implications on demand conditions. As documented workers’ flexibility in their employment decisions has recently been enhanced by federal imperatives governing insurance benefits, this study will verify the effectiveness of EPHB in retaining them under farm employment even when guaranteed to receive such benefit in other industries. On the other hand, a stronger EPHB effect on undocumented workers’ farm employment decisions may be expected as such workers are not guaranteed by law to be entitled to receive them.  In this case, the EPHB decisions of farm employers reveals some serious labor demand issue involving trade-offs among business profits, worker supply and labor productivity.

In this analysis, we find that the percentage of EPHB-covered farm workers increased over time and validate that rate of EPHB covered undocumented farm workers converged to documented farm workers. Prior to running the empirical models, the data of this study are pre-processed with Coarsened Exact Matching method, which is designed to reduce the endogeneity issues within the estimation.

Another article analyzed issues related to the U.S. hired farmworkers’ utilization of health care services and their specific choices among health care provider and health bill payment method options. Using data from the National Agricultural Workers Surveys for the years 2000 to 2012, this article employed Propensity Score Matching and probit estimation techniques to examine the health care utilization of hired farmworkers. This study’s results indicate that undocumented hired farmworkers are 10.7% and 3% less likely to use U.S. and foreign health care, respectively, compared to documented farmworkers. Health insurance is found to significantly increase hired farmworkers’ use of U.S. healthcare by 22.3%. Notably, compared to their documented working peers, undocumented workers are much less likely (10.3%) to patronize private clinics than they are more likely (3.6%) to rely on migrant health centers even when such facilities remain as their most viable sources of health care service. This article’s analytical framework was extended in another article that includes the H2A workers as a separate category to be compared against the other worker categories.  This study highlights the considerable differences in employment, social, and economic stature of H2A workers vis-à-vis the undocumented workers they are supposed to replace.

Using a computable general equilibrium model, a climate change study analyzed its labor effects and the importance of labor programs. This study finds that considering the overall decrease in pasture-land productivity when production and consumption behaves as usual, there is substitution of land for capital and labor.  There is an overall increase in the demand for labor everywhere. In the case of United States, many agricultural industries require about 50% increase in labor to compensate for the less productive land. Considering the fierce competition for local and international competition, United States has to offer more attractive contracts to attract labor from neighbor regions. Thus, programs such as H2A labor program are crucial to ensure the requirements and needs for labor in labor-intensive industries such as crop and livestock production. Under mitigation of climate change, both scenarios show that even under efforts to reduce climate change, the need for labor is substantial in all regions of the world. United States still requires 40% more labor overall in agricultural sectors compared to our baseline. This means that, independently of the mitigation, the need for programs such as the H2A program are keys to ensure the necessary labor for production. Likewise, in order to make this program attractive, the prices must be competitive in order to attract people from different nations.

Another study utilized a probit model with random effects to examine how local economy and demographic composition affect whether local government signs immigration laws. Furthermore, the study examined how sub-federal immigration laws affected the number of H-2A visa applications. The study found that some local economic factors and demographic composition have statistically significant influence on if local government chooses to sign immigration laws. In addition, the result implies that the enactment of state-wide law enforcement will decrease the H-2A visa applications.

Another (ongoing) study’s preliminary results indicate the H2A program’s importance in supplying replacement labor for displaced undocumented workers. The program’s current utilization rate, however, falls below expectations.  Moreover, the replacement labor from the H2A program can potentially maintain and even enhance the viability potential of businesses through effects on revenue and income growth rates, BUT the current costs associated with H2A labor employment are too high to realize profitability targets.