Farm labor scarcity and its uneven impacts on crop producers in the United States

Abstract This study is the first to evaluate the impacts of farm labor scarcity on producers in the United States across different crop production systems. Between 2002 and 2017, we disentangle the effects of labor scarcity from the impacts of rising commodity demand, technological change, and supply of other inputs on labor market outcomes. We leverage insights from a stylized theoretical framework, that shows labor market outcomes depend on these market forces and structural parameters like factor‐specific productivity changes, factor supply and substitutability. We implement a two‐step novel empirical strategy. First, we use constrained optimization approach to simultaneously estimate changes in input‐biased factor productivity, labor substitutability and price elasticity of labor supply for key Farm Resource Regions. Our estimates show that labor productivity in the Fruitful Rim region has stagnated relative to field crop dominant systems during our study period. This underscores the differences in capacity to adjust to labor shortages across production systems. Second, we use the first‐step estimates and a spatially explicit partial equilibrium model, to identify the responsiveness of wages and employment to reduced supply of farm workers. We find that a 1% annual decline in farm labor supply can increase hiring costs by 7.4% for specialty crop growers and 5.9% for field crop producers over the course of a decade. These can be further aggravated if trade policies increase demand from domestic producers and immigration policy further accentuate farm worker shortages. Addressing labor scarcity will be key to ensuring the long‐term sustainability and resilience of the agricultural sector.