Recent study says loss of foreign workers would hurt agriculture

Given a tight labor market, particularly in rural areas, the loss of foreign-born workers would lead to a drop in agricultural jobs, according to a study commissioned by the National Pork Producers Council.

Economists with Iowa State University, using a study from the U.S. Department of Agriculture’s Economic Research Service, determined that a reduction in the foreign-born workforceprompted by a change in immigration policywould not be offset by native-born workers and permanent residents.

Instead, they found, the tighter supply of foreign-born workers would reduce overall demand for workers as production costs increase and would decrease agricultural output as farmers abandon labor-intensive operations.

The result would be a 3.4 to 5.5 percent decrease in the total number of farm workers.

Several factors have led to a severe labor shortage in agriculture, including a negative population growth rate in rural areas since 2010, an aging rural workforce increasingly unable or unwilling to do strenuous agricultural work, a decline in immigrants going into rural labor markets and an unemployment rate hovering near 4 percent (most economists consider 4 percent “full employment”), the ISU economists found.

Among the key findings:

Agriculture in general and particularly the hog industry has changed dramatically in recent decades, from an industry largely utilizing family labor to an increasingly capital intensive, technology and science driven one with a significant demand for hired full-time skilled and unskilled workers. From 2001 to 2015, employment in the swine industry grew by an annual rate of 2.1 percent, a rate three times faster than employment growth in all United States industries. Even during the worst recession since the 1930s, the hog industry created jobs. Total and weekly wages in hog production jobs have also grown significantly faster than the average of all U.S. industries over this 15-year span.

The robust demand for labor in the hog industry is against a backdrop of increasingly threatening macroeconomic and demographic trends. The most immediate challenge to hog production firms in the industry has been the strengthening of the broader U.S. labor market with the U.S. unemployment rate falling from 10 percent in 2009 to 4.1 percent in early 2018. This low rate of national unemployment still understates the tight labor supply in most of the largest hog production states where unemployment is near or below three percent. Furthermore, in the largest hog production states the labor force participation rates are generally well above the national average, indicating little or no slack in these local labor markets.

The most threatening trend facing hog producing firms in the longer term are the demographic realities in the non-metropolitan counties where hog producing firms are overwhelmingly located. Population growth has been slowing in U.S. non-metro counties for decades and large swaths of rural America have had negative growth or loss. But since 2010, a tipping point may have occurred with the overall non-metro population growth rate turning negative. In almost 70 percent of non-metro counties, outmigration and deaths have significantly outpaced births and in-migration. The aging rural workforce that remains is increasingly unable and unwilling to do the strenuous labor that agricultural work demands. As more rural residents age beyond their childbearing years, this negative trend in population and labor force will likely accelerate. From 2007 to 2017 the rural labor force shrank in seven of the eight largest hog producing states.

A final, and important, trend that is exacerbating the ever-tightening rural labor market is the declining flow of immigrants into rural labor markets. Over the last 30 years, the immigration of foreign-born workers offset some of the decline in rural native-born population and labor force. That trend had likely already reversed even before the recent emergence of political sentiment toward stricter immigration controls and increased enforcement. Furthermore, an increasing proportion of the large influx of immigrant workers that came to the U.S. in the 1980s and 1990s are aging beyond their prime working years. Ever improving economies and rapidly falling population growth in immigrant sending countries are increasingly changing the calculus of potential immigrants. There are more and better jobs in many immigrant-sending countries and the baby booms in those countries that fed the immigration waves in recent decades are past. These trends, in an environment of tighter immigration rules and enforcement, combined with the negative growth in native-born rural populations almost certainly portend decades of increasingly difficult labor market conditions for all rural firms including hog producing firms.

“The U.S. pork industry needs access to a legal and productive workforce,” said NPPC President Jim Heimerl, a pork producer from Johnstown, Ohio. “And skilled and unskilled foreign workers have been crucial to maintaining and growing the workforce and revitalizing rural communities across the United States. We need more of them, not less.”

NPPC is supporting congressional legislation that would create a new visa that allows non-seasonal foreign agricultural workers to remain in the United States for up to three years while deferring a portion of their pay as incentive for periodic “touchbacks” to their country. The H-2C visa would replace the current H-2A temporary, seasonal agricultural worker program.

The legislation initially would let agricultural employers hire up to 410,000 foreign workers for on-farm jobs and 40,000 for meatpacking plants. It also would put the H-2C program under USDA rather than the Department of Labor.

“If we don’t address the current labor shortage or it gets exacerbated, we could see animal health and well being suffer and agricultural facilities shutting down, causing severe financial harm for farmers and ranchers and to rural communities,” Heimerl said.

In 2012, hog and pig farmers in the U.S. spent over $837 million on hired labor, a 12 percent increase from the previous Census of Agriculture in 2007. The labor expense was even greater, at $1.2 billion and a 19 percent increase, when contract and custom labor was included.

Nearly 38 percent of hog and pig farms reported having hired labor in 2012 and the average per farm hired labor expense was $102,000, increases of 28 percent and 23 percent, respectively, since 2007. Almost 1,400 farms reported having a hired labor expense over $100,000 in 2012.