Sunday, 25 April 2021

The case of Californian tomatoes

It's a weird way to cite Clemens et al 2018.

NZIER's latest report for ProdComm on immigration has a box inset titled "The case of Californian tomatoes." 

The inset, pasted below, notes the American 'bracero' agreements between the US and Mexico which allowed Mexican manual labourers to work in American fields. The inset goes through a 2010 piece by  Ed Taylor looking at the substitutes that emerged for imported workers, after the end of the restrictions. It notes mechanisation, and describes rising wages over the subsequent period alongside unionisation and other changes.

It's a bit hard to establish causality in any of that discussion. The Taylor 2010 piece is a bit of a narrative literature survey. But the impression left by the inset was that the substitution away from bracero workers, after the programme ended, led to higher wages for farm workers. I've copied it below; maybe your reading of it is different than mine.

But the first footnote in the inset is to Clemens et al 2018. Footnote 212, at the end of the first paragraph. Looking at the footnote's placement, it seems there just to establish the existence of the bracero agreements. But Clemens 2018 is the piece I talked about in my NZ Herald column last year, when I was annoyed that NZIER had ignored Clemens's work in its first report. 

That work, published in the AER in 2018, didn't just document that the bracero arrangements existed. It  was able to establish causality about the effects of ending the bracero agreements for the wages of local farm workers. It used a diff-in-diff structure comparing states that relied on bracero workers with those that didn't, before and after the end of the programme. And it showed no increase in wages for local farm workers consequent to the ban on bracero workers. 

Clemens et al conclude:

The exclusion of Mexican bracero workers was one of the largest-ever policy experiments to improve the labor market for domestic workers in a targeted sector by reducing the size of the workforce. Five years afterward, the agricultural economist William Martin called advocates of the policy “obviously… extremely na├»ve” since “capital was substituted for labor on the farm and increased effort was exerted by the agricultural engineers in providing the farmers these capital alternatives” (Wildermuth and Martin 1969, p. 203). We find that in broad terms this assessment, though perhaps uncharitable, was accurate: bracero exclusion failed to substantially raise wages or employment for domestic workers in the sector. Employers appear to have instead adjusted to foreign-worker exclusion by changing production techniques where that was possible, and changing production levels where it was not. This mechanism requires further elucidation. Further research should explore other natural experiments to test causal links between labor scarcity and endogenous technical change, as urged by Acemoglu (2010, p. 1071)

So, the restriction did lead to mechanisation (and changes in which crops were planted) but that didn't do anything for wages or employment of local farm workers. 

It's then, well, I bit weird to write a whole box inset on the changes in access to migrant labour in US agriculture that leaves a strong impression it led to improved wages, while entirely ignoring the finding of the first paper cited in the box inset, published very recently in the top journal we've got, that shows no causal link from banning migrant workers to higher wages. 

How does that happen? Did nobody read the Clemens piece or know what it was about? Or did it just not seem relevant to any of them that the paper's clear finding was rather at odds with what the box inset was suggesting?

If you like mechanisation for mechanisation's sake, or take a cargo-cult understanding of productivity, then maybe banning migrant workers and replacing them with machines, with no effect on wages or employment for local farm workers is great. Pull a pile of foreign workers out of the denominator on a productivity calculation and put machines in instead, and you'll get a different number on productivity. 

But there's a difference if that outcome obtains because the firm saw the machines as being more cost-effective as compared to it obtaining because the foreign workers were banned. 

Deporting all the RSE workers to force their replacement by machines seems a cargo-cult version of productivity. That Clemens found no improvement in wages for local ag workers suggests pretty strongly that the move there really wasn't improving the local workers' productivity in any meaningful sense. 

It seems that most of Wellington is convinced by the kinds of stories that were prevalent among the American progressives of the 1930s. It didn't lead to good policy back then either. If you've read Tim Leonard on that era, it's hard not to hear echoes of Edward Ross's worries about migrants' predisposition to "underlive" locals. 

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