Testing for Disequilibrium in the Hired Farm Labor Market: Comment

In a recent article, Duffield and Coltrane use an econometric model to test for disequilibrium in the hired farm labor market. Cusum and cusum of squares tests show that the estimated parameters are stable. Estimated shortand long-run elasticities of adjustment suggest that the national hired labor market adequately adjusts to changes in farm and nonfarm wages, number of farms, farm prices, and family labor. The methodology used is sound and appropriate for testing for disequilibrium in a market. However, we have three comments. The first is to question whether their model using time series data from 1948 through 1989 successfully captures the dramatic structural changes that occurred in the farm sector over this period. Among the many changes affecting farm labor are mechanical innovations, production system modifications, and child labor laws. The authors include a "number of farms" variable and a trend to reflect these structural changes, but it would have been preferable to test for significant differences between blocks of time, and then use a shorter, recent time period for the analysis, say, since 1975. The second is to ask if the results of this model are subject to the Lucas critique (Lucas). The parameters of the model were estimated over a period when the government was continually "interfering." Between 1948 and 1989 we've seen the Bracero and H2A programs and special agricultural programs under the 1986 Immigration Reform and Control Act (IRCA). These government programs affected employment levels of hired farm labor. In fact they were designed specifically to increase or maintain the supply of agricultural labor (Heppel and Amendola). So how can this model be used to indicate how well the market adjusts without government interference? The third and probably most important comment is to question the appropriateness of using aggregate U.S. data to model the hired farm labor market. The bulk of the hired farm labor force is found in a handful of states: In California, three-fourths of the farm work force is hired; in Florida, 68%; while in the Cornbelt, only 15% is hired (USDA, NASS). Aggregate U.S. data wash out the heterogeneity of U.S. agriculture and the diversity of farm labor use. The contrast between a salaried hired worker on a Wisconsin dairy farm and a seasonal migrant worker from Mexico who picks California grapes could not be more striking. How meaningful is it to lump them together to analyze an overall labor market? There are many labor markets in the nation, differing markedly by crop and region of the country. In some of these labor markets, for example, where a high minimum wage is enforced, the observed labor quantity may be on the demand curve and there would be a surplus of labor. In other markets where farmers demand more labor than is supplied at the prevailing wage, the observed quantity may lie on the supply curve meaning a labor shortage. In still other markets where temporary workers are attracted at the prevailing wage, a downward supply shift could lead to the observed quantity hired being at or near the intersection of supply and demand. The point is that aggregate U.S. data homogenize these interesting differences. Evidence of labor market equilibrium nationally clearly is not evidence for local equilibria where regional differences are pronounced. Further, it is not true that labor moves easily from shortage to surplus areas. In a recent survey of farmworkers in Oregon (Mason, Cross, and Nuckton), we find that workers don't even shift readily between crops located in close proximity, such as between strawberries and Christmas trees in Oregon's Willamette Valley. Rather, they develop skills in one (or a few related) crop(s) and follow that crop through the production season. Given the heterogeneity of the U.S. farm labor markets, we question the author's use of aggregate U.S. data over four decades to draw the particular policy conclusions for the early 1990s that they suggest (p. 419):