Price Controls For Immigrant Farm Labor

In the mainstream news, confusing headlines say that the government is “seeking to cut farmworker wages.” Both the Wall Street Journal and NPR describe it this way. NPR says, “To Help Farmers, White House Wants To Lower Migrant Wages.” Obviously this is pretty dastardly. The federal government, which apparently sets all prices, just feels that wages should be lower. 

This is a ridiculous way to explain the intent for a less regulated market for immigrant labor. The move is not happening in an imaginary socialist central planning agency that arbitrarily believes a price should be differently set from the previous arbitrarily determined price. It is also not a bailout or artificial protection of the farming industry. The absence of government intervention cannot be artificial protection. 

In reality, a possible move by White House Agriculture Secretary Sonny Perdue and Chief of Staff Mark Meadows would reduce artificial minimum wage rates called Adverse Effect Wage Rates, set by the Department of Labor specifically on H-2A guest agricultural workers. Adverse Effect Wage Rates range from $11 per hour to $15 as specific red tape around foreign labor. This is not “lowering wages for farm labor” but rather lowering a price floor that keeps it above the market price. The Department of Labor sets these regulations based on the twin fallacies that minimum wages increase wealth and benefit workers, and second, that domestic labor needs artificial protection from foreign labor. 

It is true that the White House is justifying the lower minimum wage as protection for the farming industry, specifically for the lack of demand during the lockdowns. It is also true that the same individuals would likely support new government intervention to prop up farming at the expense of others. But a rollback from artificial standards and interventions can be taken as positive where given. It is invalid logic to treat the rollback or repeal of a wage or price control as pandering to the interests of business when the control should not have been there in the first place. Cronyism is the use of government to prop up certain industries with acts of aggression, not the relief of industries with the repeal of aggression to allow voluntary exchange. 

If the market price of foreign farm labor falls, it is not a conscious act of government, but a fall in the marginal productivity of those specific workers. In a downturn, businesses are liquidated and unemployment rises, leading to less consumer demand and less market value produced from labor that produces consumer goods. Given the fall in prices during the reallocation period of an economy after the artificial credit expansion of the boom period, wages must fall in alignment with the fall in prices. If the government holds wages artificially high during this period, it does not increase real wealth, but rather upholds a dislocation in the economy causing unemployment. 

Image: Dana Marostega|Flickr

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s