Book Description

Farm operations in the United States have been exposed to an increased amount of labor-related risk over the past two decades, both in terms of the labor they demand and the labor they supply. Farms increasingly face the risk of having their demand for immigrant labor go unmet, as increased anti-immigrant sentiment in the United States and improving conditions in their home countries have reduced the incentives for immigrants from Mexico and Central America to work in the US. On the other hand, off-farm work by at least one member of the household has become the norm for all but the largest farm operations. This increased integration with the off-farm or non-farm labor market, driven in part by growing female labor force participation, has, on the whole, improved the financial situation of the average farm household, relative to the average non-farm household. Off-farm income has also been found to be an important determinant of a farm's ability to pay off debt. However, these boons are not without risk: farm finances become more directly intertwined with the performance of the economy in general and, crucially, increasingly reliant on job opportunities being available locally. As rural economies around the country continue to decline, there are likely to be impacts on the future viability of farm operations, especially for farms that support their operations with income earned off-farm. Because those farms tend to be medium-sized operations (either in acres operated or net farm income), they are the farms that will be most affected by increased volatility in the labor market. Therefore, understanding the impacts of that volatility on farm financial viability may also give insight into the growing trend of farmland concentration, which may have its own part to play in the economic decline of rural areas. Over the same period characterized by increasing rural decline, increasing off-farm labor market participation, and increasing reliance on an increasingly unreliable immigrant labor force, government programs aimed at stabilizing and bolstering farm incomes have changed dramatically. Rather than cash transfer and direct payment programs, crop insurance has become the centerpiece of farm support policies. Although crop insurance protects farms from production risk, anecdotal and theoretical evidence suggests that this may encourage farmers to take on more financial risk. These increased levels of financial risk might, in turn, have implications for the amount or kind of labor used on the farm, or implications for the the extent of the farm household's participation in the labor market. Changing farm support policies may cause farmers, or the members of their households, to substitute time spent on off-farm employment with an increased presence on-farm, or vice versa. Given this situation, it is important to understand the impacts that these areas of increased risk have on farms' more short-term, day-to-day operating decisions as well as on their financial decisions that affect their longer term prospects. Although farm operations today are more reliant on the off-farm labor market than ever before, academic or policy-oriented research on the nature of this link has not kept pace with advances in empirical estimation techniques from the general labor economics literature. These estimation strategies can be applied to farm-level data, which include detailed records of labor demanded by the farm and the hours supplied by different members of the farm household to the non-farm economy. Together, these causal results yield valuable insights on the farm level impact of changes in the labor market. The three essays in this dissertation each address a different facet of the implications of increased on-farm risk. Chapter I, "Behind Every Farmer: Off-farm labor and farm viability," speaks to how changes in the off-farm work opportunities for the farm operator and his spouse differentially affect the amount and kind of debt taken on by the farm business or farm household. The estimation strategy replies on the spatial dispersion of growing and shrinking job opportunities for men and women, drived by increased by import competition from China over the past two decades. These results are important for understanding the extent to which farms need robust, thriving rural economics; they have implications for both farm and rural policy, which may by more and more interconnected in the future. Next, Chapter II addresses how the increased use of Federal crop insurance (FCI) has increased farms' use of short-term debt. This work is well-positioned to be extended to analyze how that increased short-term debt is being used on farm: for example, whether it encourages a increase in the capital-to-labor ratio or reduces the need for off-farm income. The third and final chapter examines the implications of an increasingly volatile supply of labor to the farm by looking at how local immigration enforcement causing labor supply shocks impacts farms' operating decisions. Counties with programs that allowed for increased enforcement of immigration laws operated fewer acres and had fewer workers. Additionally, the results suggest that the ability to substitute for this class of worker, either with machinery or native workers, is limited. American farm operations require access to a stable immigrant labor force in order to ensure expanded operations in the face of global population and income growth.