Georgia's Harsh Immigration Law Costs Millions in Unharvested Crops

[Adam Ozimek]

Jay Bookman provides some unsurprising news about Georgia's illegal immigration crackdown: there are unintended, negative consequences.
After enacting House Bill 87, a law designed to drive illegal immigrants out of Georgia, state officials appear shocked to discover that HB 87 is, well, driving a lot of illegal immigrants out of Georgia...

Thanks to the resulting labor shortage, Georgia farmers have been forced to leave millions of dollars' worth of blueberries, onions, melons and other crops unharvested and rotting in the fields. It has also put state officials into something of a panic at the damage they've done to Georgia's largest industry....

The results of that investigation have now been released. According to survey of 230 Georgia farmers conducted by Agriculture Commissioner Gary Black, farmers expect to need more than 11,000 workers at some point over the rest of the season, a number that probably underestimates the real need, since not every farmer in the state responded to the survey.

The economics here aren't particularly complicated, and I'm sure they won't be new to the sophisticated readers of the Atlantic, but they are useful to look at and consider explicitly when thinking about issues like this.

It goes like this. If you're not going to let illegal immigrants do the jobs they are currently being hired to do, then farmers will have to raise wages to replace them. Since farmers are taking a risk in hiring immigrant workers, you can bet they were getting a significant deal on wage costs relative to "market wages". I put market wages here in quotations, because it's quite possible that the wages required to get workers to do the job are so high that it's no longer profitable for farmers to plant the crops in the first place. The simple labor market supply and demand curves below illustrate exactly what I'm talking about.

oz pic.JPG

Here the leftward shift in the labor supply curve when moving to a market with immigrants to one without reflects the fact that for any given wage, there are less people willing to do the job. If the supply curve shifts far enough to the left, the equilibrium quantity of labor becomes negative, meaning that farmers will hire zero workers. If workers are needed to run a farm, then zero workers is the same as zero crops, and zero farm. Some labor may be replaced with capital, but in other cases the farms might just shut down.

Importantly, the more competitive the final goods market (meaning the market for the product that the workers are being hired to make) the flatter the labor demand curve will be. If the market is competitive, then a small increase in prices will cause buyers to shift to a competitors products. This means that a firm's (or in this case, a farmer's) profits are sensitive to small shifts in input prices. In the case of agriculture, where one farmers crops are usually very comparable with another farmers, the market will be highly competitive and the demand curve will be flat. This problem is even more exacerbated when the demand is for Georgia farmers in particular, since retailers who buy their products can shift to farmers in competing states.

All of this is to say if you're going to stop illegal immigrants from doing a job you should be prepared for the job, and perhaps even the business itself, to go away. You may think this is worth it, but you should at least be acknowledging the risks and weigh them against what, if anything, you think is being gained.