From PRB.org, Population Reference Bureau, “Migration’s Economic Tradeoffs: Farm Worker Wages and Food Costs” by Philip Martin, June 2010.
Editorial note from Farmworkers’ Forum: Philip L. Martin, professor of agricultural economics at the University of California-Davis, is one of the foremost authorities on the economics of the farm labor market. In this report from June 2010, Prof. Martin summarizes the disproportionate economic impact that an increase in fresh produce prices would have on consumers at the dinner table versus the workers in the fields. According to Prof. Martin’s research based on 2008 data, a 40 percent increase in farm worker wages would translate to as little as $16 a year increase in end consumer costs. This surely is a “palatable tax” on the American consumer.
(June 2010) Migration is often characterized as either good or bad; migration is seen as a benefit for adding needed workers or blamed for depressing wages. In reality, most public policy choices are heated debates about which of two “goods” deserves higher priority, with no easy way to balance the tradeoffs. For example, raising interest rates can reduce inflation but increase unemployment, explaining the ongoing policy debate over which “good”—low inflation or low unemployment—should get higher priority.
Agriculture provides an example of tradeoffs between the “goods” of low food prices and decent incomes for farm workers. About 75 percent of the workers on U.S. crop farms were born abroad, mostly in Mexico. Over two-thirds of these immigrant farm workers are believed to be unauthorized. According to the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey, there were 121 million “consumer units” in the United States in 2008. Each unit consists of an average of 2.5 persons, 1.3 wage-earners, and two vehicles. Average annual income before taxes was $63,600 and expenditures averaged $50,500 a year.
These expenditures included $6,400 for food (13 percent). Food spending was split between 57 percent for food eaten at home ($3,700 or $71 a week) and 43 percent for food bought away from home ($2,700 or $52 a week). To put the relatively low proportion of expenditures on food spending in perspective, $17,100 went toward housing and utilities; $8,600 for transportation; $3,000 for health care; $1,800 for apparel; and $2,800 for entertainment.
Americans spend relatively little on fresh fruits and vegetables. The average consumer unit spent more annually on alcoholic beverages ($444) than on fresh fruits and vegetables ($434). Even though there is little additional labor involved after some fresh fruits and vegetables leave the farm—strawberries are picked directly into the containers in which they are sold and iceberg lettuce gets its film wrapper in the field—farmers get a small share of the retail food dollar. In 2006, farmers received an average of 30 percent of the retail price of fresh fruits and 25 percent of the retail price of fresh vegetables. Annual expenditures of $434 per consumer unit come out to $120 to the farmer, and only one-third of this $120 went to farm workers, or $40 a year.1
What would happen to consumer food costs if farm wages rose and the extra costs were passed on to consumers? The average earnings of field workers were $9.78 an hour in 2008, according to a U.S. Department of Agriculture survey of farm employers, and a 40 percent increase would raise them to $13.69 an hour. If this wage increase were passed on to consumers, the 10 cent farm labor cost of a $1 pound of apples would rise to 14 cents, and the retail price would only rise to $1.04.
A 40 percent increase in farm worker wages would raise average consumer unit or household spending by just $16 a year, the cost of two movie tickets. However, seasonal farm workers employed 1,000 hours a year would see their earnings rise from $9,780 to $13,600, or from below to above the federal poverty line of $10,400 for an individual in 2008.
Philip Martin is professor of agricultural economics at the University of California-Davis, chair of the University of California’s Comparative Immigration and Integration Program, and editor of Migration News and Rural Migration News.
- U.S. Department of Agriculture, “Food Marketing System in the U.S.: Price Spreads From Farm to Consumer,” accessed at www.ers.usda.gov/Briefing/FoodMarketingSystem/pricespreads.htm, on June 3, 2010.