Explaining Agricultural Labor Shortages with Unpredictable Product Losses: A Case Study of Spotted Wing Drosophila in California Raspberries

• Agricultural Economics Workshop

Date and Location

Tuesday, November 12, 2013, 12:10 PM - 1:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

California agricultural producers are reporting labor shortages, particularly for commodities that require considerable seasonal harvesting labor. I propose that these perceived labor shortages can be partially explained by producers misjudging market wages due to unpredictable product losses in piece-rate harvesting operations. Using a recent invasive vinegar fly infesting Central Coast raspberries as an empirical example, I model the effect of fruit losses, unobserved by managers, when compensation is tied to a piece-rate. I find that these losses cause producers to offer net earnings below a market rate, with greater losses causing more distorted wages. Rational, informed workers select growers offering the highest net earnings and avoid growers who substantially misjudge piece-rates, further compounding yield losses in fields with significant infestation. Direct fruit losses from the invasive are estimated to be 4.9% of production for conventional raspberry growers observed in a scientific study. Should these fruit losses reduce worker productivity, estimated yield losses increase to 6.0%, with harvesting labor costs increasing 12%. These results demonstrate that productivity-compensated agricultural workers have a significant monetary incentive to arbitrage between fields, explaining why some growers may have difficulty hiring sufficient harvesting labor.