Mar 8, 2021NCAE column: Wage increases naturally lead to job loss – ag included
Seriously, what did they expect would happen?
The nonpartisan Congressional Budget Office recently analyzed the economic impact of the Raise the Wage Act of 2021 and found, to the surprise of no one in agriculture or any economist for that matter, that raising the federal minimum wage to $15 per hour would result in the loss of 1.4 million American jobs.
So-called Progressives were stunned. How could it be that the holy grail was anything else?
Markets, elegantly and effectively, allocate resources to their highest and best use within any economy. Government interference in markets impedes market efficiency and should be avoided. This is something widely understood by the people with “skin in the game” who employ agricultural workers.
Why do some policymakers have such difficulty understanding this? Perhaps it is because they have spent their working years signing the back of a paycheck as opposed to an agricultural employer who signs the front.
I guess the notion sounds appealing. Free money for doing the same work. Hip, hip, hooray.
Do not worry about the level of effort or initiative employed by the worker, just ask the government to impose a mandate and, like a flourishing twirl from a magician’s wand, abracadabra, all ills are cured.
Except, it does not work that way, regardless of the sleight of hand or diversion of attention employed by the magician. Even when the magician is disguised as the government.
America’s farmers and ranchers are aware of this reality. They have watched year after year after year as their input costs have risen, and the price they receive for their crop has diminished or stayed flat, while their competitors have flourished. Economics is not a magic trick.
Here is what I mean.
The United States has seen a flight of agricultural production that feeds our nation to foreign competition. As input costs, including labor, have reached unsustainable levels, the production and the infrastructure that supports it have sought a more friendly climate. Members of the media are shocked when I relate to them in interviews that today over half of the fresh fruit and one-third of the fresh vegetables consumed in the U.S. are produced outside our borders.
This is not unlike what the U.S. experienced with the flight of manufacturing jobs to venues outside of our country. As regulation and input costs made building automobiles in the United States profitless, production left. Not only that, but quickly the supporting automotive parts manufacturing moved out as well.
Confused government policy, if not checked, is likely to do the same with agricultural production too.
In jobs where it becomes more cost effective to employ machines instead of people, the people lose their jobs. Think about the grocery store or the gas station as examples of this.
The grocery stores where I shop have far more self-service kiosks for checkout than they have people checking out customers. And often, the jobs bagging groceries are gone from the full-service aisles as well.
It is also a rarity these days to drive into a gas station and see someone hustling as I did in high school to pump the customer’s gas, wash their windows, check the oil and tire pressure, collect the payment and see the customer on their way. Today, most gas is pumped self-service and the jobs that full-service supports are gone.
It would be a tragedy for the same to occur to the American farmer and rancher because of the tragedy that would be consequent to the American consumer and to America’s national security.
What did they expect would happen?
— Michael Marsh, president & CEO, National Council of Agricultural Employers