Farm labor productivity and the impact of mechanization

There is a chronic shortage of agricultural labor in the US. Although growers increasingly turn to guest‐worker programs to meet their labor needs, few regard immigrant workers as a viable long‐term solution. Many producers of labor‐intensive agricultural commodities regard mechanization as a clear long‐term solution, making the slow rate of adoption of mechanized harvesting equipment in the US an empirical puzzle. In this article, we demonstrate that wage‐setting farmers have an incentive to “overmechanize,” or employ more than the cost‐minimizing level of capital when capital and labor are substitutes, but “undermechanize” when labor and capital are technical complements. This outcome can cause agricultural labor problems to persist under complementarity. To assess the potential role of farm under investment in labor augmenting capital equipment, we examine labor market outcomes following the adoption of non‐autonomous harvesting aids on a large strawberry farm in Central California. We develop an econometric model of peer‐affected productivity that controls for the group performance of farm workers operating in crews and find that mechanical aids complement labor in strawberry production, a finding that helps explain not only the relative lack of mechanized harvesting in strawberry production but, more generally, the persistent productivity gap in agricultural industries. We examine the broader implications of our theory for the slow rate of adoption of mechanical harvesting technologies in US agriculture by comparing general wage trends across several labor‐intensive and non‐labor‐intensive industries in California.