Assessing the Impact of a Labor Shortage on Post-Harvest Activities and Markets

Assessing the Impact of a Labor Shortage on Post-Harvest Activities and Markets

Andrew Cassey, Associate Professor, School of Economic Sciences, Community and Economic Development Extension, Washington State University, Kwanyoung Lee, Ph.D. student, School of Economic Sciences, Washington State University, Jeremy Sage, Assistant Research Professor and Assistant Director, Freight Policy Transportation Institute, School of Economic Sciences, Washington State University, Peter Tozer, formerly Research Associate and Director of IMPACT Center, School of Economic Sciences, Washington State University
Labor is an important part of horticultural commodities and products. Labor shortages can affect many aspects of industry, including production, distribution, and even pricing. While labor shortages are often thought of as a pre-harvest problem, it turns out that they can create similar problems for post-harvest. This publication discusses how pre-harvest labor shortages can impact post-harvest activities and markets in the apple and peach industries.
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Abstract

Labor is an important input into the production and distribution of US horticultural commodities and products. Labor shortages are often thought of as a pre-harvest problem, and the economic impacts of labor shortages are estimated with respect to production. We find a pre-harvest labor shortage creates a post-harvest labor shortage as well, and leads to increased prices of more than 15%. The apple industry is able to adjust to the labor shortages better than the peach industry because consumers are more sensitive to price increases of peaches than apples.

Introduction

For horticultural commodities, labor is necessary not only for pre-harvest and harvest activities but also for post-harvest activities such as management, marketing, packing, and distribution. Labor shortages can lead to sizeable losses for producers of all sizes as well as lack of choice for consumers. Historically, labor shortages are usually thought of as a pre-harvest problem, and the economic impacts of labor shortages are estimated with respect to the impact on production. (We use the term pre-harvest throughout to account for both pre-harvest and harvest activity.) Such an approach does not consider that a labor shortage for pre-harvest activities may have impacts on the post-harvest labor market, which would be realized in terms of impacts to the timely transportation and delivery of harvested produce to market. Thus the size and economic consequences of post-harvest labor shortages are unknown. This is an important problem because post-harvest labor shortages undermine the best methods for processing, packing, handling, transporting, storing, distributing, and delivering agricultural products.

A labor shortage is the difference between the number of workers willing and available to work and the number of workers needed by producers at a particular wage rate. Post-harvest is the time from the instant the bulk of the crop is separated from the tree until delivery for purchase by a consumer. It is the stage of the process covering the cooling, cleaning, sorting, packing, transportation, and delivery of products to consumers. Because fruit deterioration begins with harvest, post-harvest labor shortages causing delayed crop processing and delivery can greatly affect quality and the price paid by the consumer.

Despite advances in the environmental and biological control of post-harvest loss, spoilage of fresh produce before reaching market remains an issue. The interaction between the skill, location, and availability of labor post-harvest plays a significant role for all producers regardless of size. Thus the direct beneficiaries of our work will be producers in the apple and peach industries. The lessons from our work, however, extend much more broadly. Thus, indirect beneficiaries include the small fruit industry. Knowing the size and extent of the problem allows producers to develop more efficient and effective mitigation strategies to reduce overall economic impacts. Indirect benefits extend to other agricultural industries that face similar post-harvest labor shortages because though our results are specific to the apple and peach industries, labor shortage issues apply to other agricultural industries as well. Consumers may experience a benefit too. They may gain from increases in efficiency obtained by better management of labor shortages resulting in a lower price.

We focus on the US apple and peach industries because of their large total value of production and their wide geographic spread. Therefore, our findings apply to multiple states, producers, and agribusinesses as well as illustrate the problem to the greater agricultural sector. We also study apples and peaches because, though they are similar in terms of production techniques, they have differences in demand characteristics and spoilage rates that allow us to see how a post-harvest labor shortage would have differential outcomes on different commodities.

The results in this report are from Cassey et al. (2015). That report contains the details of the method employed as well as a detailed discussion of the effects of post-harvest labor shortage on economic welfare for consumers, labor, and producers.

Method and Data

To estimate the effects of how a pre-harvest labor shortage affects the post-harvest labor market, we develop an economic model that has two goods: apples and peaches. That model has also two labor markets: labor for pre-harvest activities and labor for post-harvest activities. Pre-harvest occupations include production workers, production managers, and irrigators. Post-harvest occupations include transportation activities, management, sales and financial operations, and jobs related to cleaning, washing, cooling, packaging, and freezing produce.

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