The timing is perfect for an economist. The horticulture industry is getting a new $25 per hour minimum wage thanks to a decision by the Fair Work Commission. The ruling, handed down earlier this month, comes just three weeks after the Nobel Prize in economics was awarded to David Card for his research about the impact of minimum wages on employment.
The impact of academic economics on the real world should not be underestimated. Card found, to the surprise of most economists, that raising minimum wages did not reduce employment nor increase unemployment.
Card can feel deeply intellectually proud because he came into a theory-focused discipline and upended it. The basic idea of a demand curve — low prices causing high demand and high prices causing low demand — did not apply in the real world of the labour market that he observed. And observation is the key to his work, which is empirical, not theoretical. Card measured employment in two adjacent US states, one of which raised the minimum wage for fast food workers.
“Our empirical findings challenge the prediction that a rise in the minimum [wage] reduces employment. Relative to stores in Pennsylvania [where wages stayed constant], fast food restaurants in New Jersey [where wages rose] increased employment by 13%,” Card and Alan Krueger wrote in a 1993 study.
This research has taken a while to bear fruit, but it is having an impact all over the United States, where minimum wage rules are finally being introduced. There are 29 US states with minimum wages higher than the pitiful federal minimum wage of US$7.25 an hour.
It is also perhaps echoing through the orchards of Australia, where pay has long been variable and insufficient. Working holidaymakers told researchers they earned 80 cents per punnet of raspberries picked, amounting to $200 for eight or nine hours of work a day, while others said they were forced to pay for waistcoats, with companies deducting chunks of their pay cheques for dirty and broken equipment.
So what will be the impact of this decision on the horticulture industry, defined as all fruits and crops that aren’t broadacre crops, or wine-grapes?
The Fair Work Decision following from the 2018 Harvest Trail Inquiry says it expects several impacts. One, the farmers will need to actively supervise more closely. They can’t rely on the piece rate to help motivate fast pickers and winnow out slow pickers. They need to actively train, supervise, and let go pickers who aren’t up to scratch.
This is likely to be good for measured productivity. If only fast workers are retained, the output per worker will be higher. Of course, it might not be good news for anyone who is a bit slower, for reasons of physique or illness. Tongan community leaders have raised concerns that farm work is the only option for some community members, and are worried they could lose out on work due to their age or physical ability.
The second impact will be, according to the Fair Work Commission, that “some employers will make greater use of automation and machinery to reduce labour costs.”
Horticultural automation is in its early stages, but it exists.
Planting is one thing. Harvest time is where the greatest labour is needed in the horticulture industry. The extent to which automation is possible in fruit-picking and other harvest activities is unclear. Fruit pickers are not just labour, they are also judgment — spotting which fruit are good to pick.
This was another issue for workers. When the fruit was poor, being paid by the punnet meant some workers were making as little as $5 an hour selecting viable cherries.
The combine harvester has taken the place of the scythe in the wheat field, but fruit grows on trees in a more random fashion than seeds grow on a stalk of wheat. They’re also more prone to damage, and therefore it’s much harder to automate the plucking.
The $25 minimum wage in horticulture might open a few opportunities in robotics, but it seems unlikely that our blueberries will feel the embrace of cyborg fingers any time soon. What it hopefully does is guarantee a more stable income for the human pickers.
It also opens a big opportunity for an Australian economist to take their own shot at a Nobel Prize by measuring what actually happens to employment and automation after the rule takes effect. The rule takes effect after a few more rounds of hearings and should be in effect next year.
So in 2022, I hope to see more economists get away from their computers and out into the strawberry patches.
Good article. Spelled out the variables, cited the evidence. This is an industry that has sorely needed intervention for over a century.
Agreed Jason, but I hate to break it to you – a Nobel Prize has already been awarded for demonstrating the idiocy of keeping farm workers in poverty. 1952. John Steinbeck for ‘Grapes of Wrath’.
About time too!
I come from a cane farming family, with my extended family in cattle raising & fattening, banana farming and mango farming.
During my youth we still had hand cane cutting gangs, who moved from one farm onto the next in a collective, rotating their cutting to one paddock per farm in rotation
We provided a barracks accommodation, which is a little like the Backpackers of a single/ double room, share kitchen and bathrooms and laundry and a big verandah out the front.
Our farm provided accommodation for all the farms cut in the group, which mostly belonged to extended family, probably because it was reasonably new as the original one burned down in the off season.It had been my grandparent’s original home until our farm house was built in the 1930’s.
The cane cutters were paid double the minimum wage with a bonus for extra production in clean cutting and stacking.
They were fed by which ever farm they were cutting on that day and as someone who helped in the kitchen I can say that none of the cutters got fat and the amount of food a group of 8 men working like slaves, 6 days a week, could eat was and is astounding to me even to this day.
Normal food : Light breakfast at 4.30am for a 5am start. Light breakfast was 2 loaves of bread toasted with Honey, home made jams. salami, ham, hard cheeses and hard boiled eggs with big teapots of tea and Coffee percolating on the stove, chickory extract supplied along with fresh milk and sugar.
After the men had departed the house cow’s latest milk in a 2 gallon bucket was carefully poured into a large pot on the top of the wood stove thermometer inserted and an egg timer used to pasteurize it.After that was compete the milk was set aside to cool before a portion was put into the fridge in the barrack.
Then we would begin frying bacon rashes and sausages made of beef, whilst more toast was made, buttered and placed on a rack under the wood stove to stay warm. Water was boiled for more tea and more coffee, jugs of cool milk.
Hot breakfast was at 7am.
Morning tea was at 10am consisting of freshly baked scones, jam, cream tea/ coffee.
Cooked Lunch at 12 which included dessert or cake
The cane cutter would then have a lie down until 2pm..
Afternoon tea 3.30 or 4 pm More scones (Pumpkin) tea and coffee..
Cooked 3 course cooked dinner of meat and three vegs or a casserole which had been cooking all day on the wood stove served with mashed potatoes done with butter or sour cream and greens and a baked dessert usually at about 6.30 pm unless there was a paddock of cane to burn ready for the next day and then dinner was delayed until after the fire was complete.
A box of beer in tall bottles was supplied each Friday night.
These men earned every calorie and used them too.
How has our country stooped so low that we are exploiting people and even charging them for water?
What is wrong with this country, that we need to have a Fair Work case to set a minimum wage for the frontline workers of the food supply chain?
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That is certainly my memory as a run away 15yr old drawn to the canefields in the early 60s – I lasted two days and that was just sharpening their knives and clearing around their feet as they cut.
The farmers knew that if they screwed the cutters their crop would stand & rot – tough times & people but each played their part.
Now have what I term corporate agriculture – picking, sorting, plastic packs for supermarkets, storage, labour hire firms, etc.
I also recall friends working around the Berri area (S. A.)during uni breaks to earn money.Never complained about the pay or living conditions but said the work hard. Which was OK as it was temporary. Usually word of mouth to get employed. Seems more trust and smaller operations back then.
Doesn’t “…to the surprise of most economists…” describe the real world?
Just as the food growers in California used to exploit “Wet backs” or illegal migrants in the 80’s nothing surprises me.
The farmers would often put off paying the migrants in their fields and then call immigration and have them deported rather than pay any wages.
Why would you refuse a job where you have to maintain a rental property so you’re not homeless for the half year you’re not picking… while paying high rent for a bunk while picking? If you want Australians to pick fruit you need to set up infrastructure that makes it possible.
But I suppose backpackers traveling the country earning holiday cash is easier, eh?
I agree we need to maintain access to the pools of slave labour.