RevUsing Technology to Address Farm Labor Shortages - Effective or Not?iewer

Dr. Nathan DeLay, Assistant Professor


Can Technology Compensate for a Labor Shortage? Effects of 287(g) Immigration Policies on the U.S. Dairy Industry


American Journal of Agricultural Economics, 103(1): 70-89


Economists have always been interested in the interactions between capital and labor. In a recent paper in the American Journal of Agricultural Economics, Drs. Diane Charlton and Genti Kostandini exploit the enactment of 287(g) immigration policies to estimate the impact of labor shortages on technology adoption and productivity of U.S. dairy farms. Their results provide key insights into the extent to which technology can compensate for shortfalls in farm labor.

Modern dairy farming faces significant threats from trade disputes, slumping demand, and low margins to outright bankruptcy and consolidation. According to USDA, 2019 saw the sharpest decline in the number of U.S. dairy operations in 15 years. Among these challenges, access to reliable farm labor consistently ranks high. Dairy operations are especially reliant on immigrant labor. About half of all dairy workers in the U.S. were immigrants in 2014, and operations with immigrant labor contributed nearly 80% of all U.S. milk that year. Unlike grain or perennial crop operations whose labor needs fluctuate seasonally, dairy farms depend on year-round workers.

But until recently, American dairy operations were largely excluded from the H2A guest worker program that supplies much of the U.S. farm workforce on a seasonal basis. As a result, dairy producers are more dependent on undocumented immigrant labor than other farming operations. The rollout of 287(g) immigration policies in select states beginning in 2005 had a significant impact on the supply of labor available to U.S. dairies in these states.

Drs. Charlton and Kostandini used the staggered rollout of 287(g) policies to examine how dairies adapt to labor supply shocks. They found that dairies suffering labor shortages compensated by adopting labor-saving technologies such as automatic take-offs, udder cleaners and computerized milking systems. These investments appear to enhance labor productivity by increasing labor’s contribution to the total value of production. That is, technology can make each unit of labor more productive. However, the shift toward technology did not fully compensate for the shortfall in labor. As a result, total output of affected farms declined, as did the number of diary operations and the average size of farms in labor-impacted regions.

What this means for Food and Agricultural Business

These findings have important implications for agribusiness professionals and their farmer clients. Technologies designed to reduce farm labor costs may not perfectly substitute for boots-on-the-ground, at least in the short-run. Farms incur adjustment costs as they learn to integrate new tools into their existing production systems, but the long-term benefits may be worth it. Farm technology may also change the kinds of labor farms demand. For example, automated calf feeders and robotic milking systems reduce manual labor costs, but they also generate large amounts of data to be analyzed. These “labor-saving” technologies may be better described as “labor-augmenting”, as they specialize skills that may not be readily available.

Farm labor is becoming increasingly scarce, and farmworker wages are rising. At the same time, precision agriculture technologies and “big data” tools are growing in popularity. Farms susceptible to labor shortages should be aware of the short- and long-run tradeoffs of technologies that boast labor savings. Proactive adoption may be preferable to reactive adoption when workers are few.