Economics as a discipline, has undergone immense dynamics and integrations over the years with the conceptual framework and theoretical assertions modifying according to the dynamics seen in the global economy and in the behaviour of the different economic agents, producers and consumers mainly (Hall and Lieberman 2012). The economic principles and conceptual frameworks play crucial roles in explaining the different problems of concern which crop up in different parts of the global economic scenario and the same also help in finding plausible solutions or way outs to combat those problems (Baumol and Blinder 2015).
Keeping the above discussion into consideration, the concerned report tries to identify the chief economic issues cropping up in one of the most influential and globally dominant economies, that is the economy of the United States of America referring to the article published in The Economist, on July 27th, 2017. The article titled, “If America is overrun by low-skilled migrants…. – The market for lemons”, tries to highlight some serious issues of economic threat, which the agriculture sector as a whole and primarily the lemon producing sector of the country has been facing in the contemporary period (The Economist, 2018).
The concerned article, sights the situations of the lemon producing companies of the USA, especially the Limoneira, the largest company in the country in this industry. The company, in the earlier periods used to have enough workers for their lemon and avocado fields, the primary reason behind the same being that the company, supported by the previous government policies and infrastructures, used to provide enough incentives to their workers in terms of competitive wages and other perks like comfortable and highly subsidized housings (housings being provided at 55% below the rates which usually prevail in the markets of California), other facilities like credit union, parks and family spaces (Guan et al. 2015). However, in the recent periods, the company, along with other fruits and vegetable producers in the country have been facing a severe crunch in the number of workers for their agricultural fields. This in turn has resulted in tremendous negative implications on the agricultural sector of the country and on the economy of the country as a whole (Gonzalez 2015).
On one hand, due to the lack of agricultural labours, the fields remain unploughed or the vegetables and fruits rot to a massive extent due to the absence of the labours to pick them up. On the other hand, due to the lack of supply in the vegetables and fruits, which are necessary commodities, the country has resorted to import more and more of them from other parts of the world, thereby hurting the balance of payment of the country (Tocco, Davidova and Bailey 2012).
The main reason behind this lack of workers in the agricultural sector, as per the article has been pay scales for the workers in the recent times, which has also been clubbed by the reduction in the number of low skilled immigrants from different countries like that of Mexico and others, entering the country (Peri 2012). The reason behind this lack of entrance of these immigrants can be attributed to the recent increase in the border security and the recent government policies to reduce the number of immigrants in the country as a whole management.
The main issues which the article has highlighted in this context, are the issues of demand and supply imbalances, the issues of payments and also the issue of immigration of low skilled workers by increasing the agricultural visas. The farmers have however, started responding to these problems, mostly in two ways- either by increasing the wages of the existing labour force, thereby motivating more labour to join their workforce, or by increasingly bringing in cheap labours from other developing countries with the help of increased agricultural visas, as can be seen from the hike in the number of agricultural visas given by the country in the last few years (Sexton 2012).
The issues highlighted in this article can be interpreted and analysed in the light of the existing economic concepts and theoretical framework. The primary problem which has been cited by the concerned article regarding the agricultural sector in the country is the recent fall in the labour force, especially the low skilled ones (Pindyck and Rubinfeld 2014). In the previous years, the agricultural sector used to have enough low skilled workers, most of them being immigrants, migrating from other economically and politically disturbed countries looking for economic stability, a job and a place to stay with their families. These being provided by the farmers, the same were able to retain the workers.
However, with increase in the border security of the country, to stop illegal immigrants especially, from other neighbouring countries, the number of low skilled immigrant labour has decreased to some extent, which thereby leaves the farmers with the only option to hire from the exiting labour force of the country. However, the existing labour force, consisting mainly of the residents of the country, may not be very eager to work at the current wage rates, thereby reducing the number of labours working on the agricultural fields of the farmers (Friedman 2017). This situation can be explained with the help of the following figure:
As can be seen from the above figure, due to the fall in the immigrants coming from Mexico, specifically, the labour supply has decreased considerably and the existing labour are not seen to be willing to work in the previous wage levels (Marked here by P*).
This in turn has resulted in decreasing the production as well as supply of the fruits and vegetables in the country. However, fruits and vegetables being such commodities which are necessarily found in the daily consumption baskets of almost all the residents of the country, belonging from all socio-economic strata, the price elasticity of the same is expected to be low (Rader 2014). This implies, that the consumers will not be able to give up massively on these commodities even if the price increased considerably, as can be seen from the following:
As is evident from the above figure, due to the fall in the supply, the price is expected to increase, however, the demand being considerably inelastic, the fall in the demand for fruits and vegetables is expected to be lower than the increase in the price of the same due to lack of labour.
Policy and Strategy Implications
The government, keeping this into consideration, has increased their imports of fresh fruits and vegetables massively in the last few years, in order to prevent their residents’ sufferings, in the aspect of being deprived of necessary consumption commodities. This in turn, has resulted in the loss of economic welfare of the government in the form of draining out of valuable foreign exchange reserves (Greene 2013). The domestic farmers have also been negatively affected by these imports as their capacities remain unutilized with the foreign producers capturing greater share of the markets.
The policy of the government of the country, in this aspect, however, should have been more targeted to increase the production and supply of the concerned commodities in the economy itself. This on one hand is expected to reduce the amount of imports, thereby increasing the balance of payment of the country and on another hand is expected to help the domestic producers in the concerned industry to increase their productivity, profitability and sustainability management.
Most of the producers in this context, have started attracting labour by increasing their wages. This, as highlighted by the concerned article, has been taken as a labour attracting strategy in many parts of the country. Overall the hourly wage of the workers has increased from $8 (2000) to as high as $12, with the rates in California hiking even more ($7 to $13). Particularly in Limoneira, the average hourly wage in the current period is seen to be as high as $19 (Taylor, Charlton and Y?nez-Naude 2012). This cost is undertaken by the farmers to save their farms from bigger losses of rotten fruits and vegetable supply and of the unploughed agricultural field. On the other hand, many farmers have started to hire workers from different countries in the form of foreign and temporary guest-workers under the H-2A Visa programme of the country. This programme has facilitated the entry of thousands of workers, especially low skilled ones from the developing countries on a temporary basis, their visas being often funded by the farmers themselves (Meissner et al. 2013).
Problems of the strategies taken
The strategy of bringing in more migrant workers, legally under the H-2A visa programme of the country, though seems to be profitable for the farmers and the consumers in the economy for the short run, it however goes directly against the policy of retaining the works for the citizens of the country only, which was taken by the government of the country to decrease the number of job drains to foreign nationals. This contradiction of the government policy, as has been done by the farmers, can lead to the loss of potential jobs of many Americans, thereby reducing their economic welfare in the long run. However, given the fact that the country is presently reeling under the pressure of lack of supply of agricultural labour, thereby reducing agricultural supplies and hurting the economy as a whole, the strategies taken by the farmers seem to be the only solution to the problem.
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