Reports of record farm profits has CNBC’s Senior Online Editor John Carney calling America’s agricultural labor shortage “phony,” and by implication, just an excuse to import cheaper foreign labor. In a year that also featured America’s worst drought in fifty years, the record profit is puzzling — at least until you look inside the numbers. The reality is that the labor shortages are not phony — what are phony are the profits. They are the product of lavish government subsidies for big agro-corporations.
Although higher grain prices induced by the short supply has partially compensated for lower production, the U.S. Department of Agriculture (USDA) essentially guarantees farm incomes anyway. The USDA is on pace to pump into the industry nearly $11.1 billion in direct handouts this year. “Farm-related income” is projected by the USDA to end 32 percent higher than last year. “Farm-related income” actually includes crop-insurance payments from the federal government, making subsidy-levels billions higher.
These Great Depression era payments contribute to ballooning federal deficits and are fundamentally anti-competitive. According to the Environmental Working Group, an organization that tracks agricultural subsidies, “from 1995 to 2011, the top 10 percent of recipients were paid 75 percent of all USDA subsidies.” In other words, this program not only benefits a certain industry at the expense of all others, but it also primarily benefits a very select group of elite farms within that industry.
This is textbook special interest politics, and by any reasonable definition, it is nothing more than waste. But if Congress does want to help farms, they should address labor shortages. This would not only help farmers, but also the American public, struggling with higher food prices. Labor shortages are a crop-specific, location-specific phenomenon, not something that is reflected by national sales figures. Most crop-harvesting is fully-mechanized and requires few workers, but vegetable and fruit crops in Arizona, Washington, California, Georgia, Alabama, and elsewhere still require many farmhands.
Like farmers who are not insured by the federal government (pig farmers, for example), farmers in these states are struggling. “It’s the worst labor problem I’ve seen in 30 years,” California’s Dick Peixoto, a watermelon radish farmer, said this week. “It’s pretty substantial, to the point where almost every day I would say we have to decide if we can harvest all of the crops. That’s part of the management of crops right now, deciding what will be the sacrificial lamb.”
Peixoto is not alone. According to a recent survey of California farmers, 80 percent say they cannot find the workers they need. “The problem is not that the labor isn’t getting paid enough,” noted California wine grape grower Ben Drake last week. “We’re paying $14 to $20 an hour typically for labor. Most average $14 an hour. A good night’s work is sometimes $20 an hour if the wine grape clusters are larger and they can pick faster. The lowest we’ve had on our payroll is $9.50. It’s not a matter of pay – it’s a matter of not having a stable labor pool.”
The University of Georgia calculated that in 2011, that state had lost $391 million from farm labor shortages. Central Washington state’s government database, WorkSource, lists more than 1,200 unfilled farm positions, and the deficit has local farmers holding meetings to discuss possible collective solutions to the problem. Farmers in many other states are holding similar meetings—if the shortage is phony, farmers are certainly putting in a lot of personal effort to sell it.
Given the fact that immigration from Mexico has stopped or possibly reversed, even past skeptics are reconsidering their position. UC Davis labor economist Phil Martin who wrote a 2007 report critical of farmers’ demand for more immigrant labor, for instance admitted recently that today’s farmers face “a period of uncertainty.” Likewise, the Republican National Committee relented to reality this month and finally included a new guest worker program as part of the national party platform.
The best way to help farmers is to allow them to hire the workers they need, not continue politically-directed handouts. Congress should replace farm subsidies with a new visa that admits more foreign workers, both as guests and residents. Government-guaranteed profits for major agribusinesses do not justify calling the struggles for many U.S. farmers “phony” — they justify calling for reform.