Imperfect Substitution between Immigrant and Native Farm Workers in the United States

The preponderance of employing unauthorized foreign-born immigrant workers in the farm labor force has made immigration policy a major issue for agriculture sector. The focal points of the policy discussions include two sides of the same coin: to what extent farm growers experience labor shortages and to what extent the immigrant farm workers affect the economic opportunities of native farm workers who are mostly less-educated. In this paper we propose a three-layer nested CES framework to model the labor demand in agricultural sector and empirically investigate the substitutability among heterogeneous farm worker groups defined by different age and education levels as well as immigration status. Using wages and employment information aggregated at different education-age-year cells from the National Agricultural Worker Survey (NAWS) data over the period of 1989 and 2012, we find little evidence that inflows of immigrants are associated with significant impact on native farm workers across different age and education groups. Within a specific age-education cell, the point estimate of the elasticity of substitution between immigrant and native farm workers is around 2. Our findings has important policy implication for the need to streamline the H-2A guest worker program which was intended by legislators to decrease the size of unauthorized immigrant workers meanwhile alleviate the potential labor shortage issues.