Labor and Technology Change in the Nursery Industry

The U.S. nursery industry is highly complex, and affected on their demand side by the construction industry and on their factor supply side by the market for low-skill labor, which in turn is influenced by gyrating construction activity as well as southern-border immigration. We examine an industry seeking to adapt to a changing demand and labor environment. Our emphasis is on the manner in which nurseries cope with increasing retailer power, increasingly quality- and variety-conscious consumers, and expectations of rising wages. We argue that the gradual growth of such labor aids as potting assembly belts and pruning equipment should be viewed in terms of a tradeoff among labor quantity, labor quality, and capital instead of the more conventional tradeoff between labor and capital. Management invests in training in order to substitute labor quality for quantity, and in on- and off-site-produced equipment in order to substitute capital for either. Capital intensification shifts the distribution of nursery skills. However, the skill distribution's shape can change in a number of ways. In a unimodal shift capital supplants labor continuously more at the lower than the higher skill levels. In a bimodal shift capital supplants mid-level employees, so that the skill distribution bifurcates between a low-skill and a high-skill mode. We argue that the capital substitution now arising in the U.S. nursery sector will take a unimodal form similar to those observed earlier in such farm commodity production as wheat and sugar beets. Low-skilled and seasonal workers, therefore, will be supplanted by more skilled and longer-term ones. Yet, rising product variety and retailer service demands will simultaneously bring a greater return to nursery computing investments, eliminating parts of the larger nurseries’ mid-level workforce and creating a renewed demand for low-skill laborers. In addition, the nursery industry will become more differentiated with respect to labor-intensity.