A study of demand and supply relationships in the agricultural labor market

Graduation date: 1972The objective of the study is to analyze empirically the demand\ud for hired farm labor and the elasticities of substitution of capital for\ud labor in the U.S., the Middle Atlantic region, the Pacific region, and\ud in the states of California and Oregon.\ud The data period 1941-1969 was analyzed for the U.S., the data\ud period 1949-1969 was analyzed for the Middle Atlantic region and the\ud Pacific region, and the data period 1951-1970 was analyzed for Oregon.\ud This latter period, represents the full available data history for Oregon.\ud This study shows that the demand for hired farm labor with respect\ud to the real wage is elastic in the short run in the Middle Atlantic\ud region and in the state of Oregon. The short run demand elasticity\ud with respect to real wage for the U.S. ranges from -0.529 to -0.663.\ud This range is significant at the 1 percent level. For Middle Atlantic\ud and Pacific regions, the wage elasticities are -2.140 and -1.371,\ud respectively. Both are significant at the 1 percent level. The short\ud run wage elasticity for Oregon ranges from -1.64 to -2.58 which is\ud significant at the 10 percent level. A study of one sector of farming,\ud the demand of seasonal hired farm labor in harvesting pears, Jackson\ud County, Oregon, finds that the short run elasticity with respect to wage\ud rate for this sector is -1.769 which is significant at the 10 percent\ud level.\ud This study also shows that the elasticity of substitution of capital\ud for hired farm labor in Oregon is greater than the rate for the Nation,\ud for the Middle Atlantic region, and for California. The elasticities\ud of substitution of capital for hired farm labor for the Nation, the\ud Middle Atlantic region, the Pacific region, California and Oregon are\ud 1.449, 1.692, 0.595, 0.429, and 1.938, respectively. They are all\ud significant at the 5 percent level except for California which is significant\ud at the 10 percent level.\ud The result of this study will be useful for agricultural policy\ud formulation. The demand for hired farm labor with respect to the real\ud wage is elastic for the Middle Atlantic region, the Pacific region, and\ud Oregon in both the short and long runs. In the long run it will be elastic\ud at the National level. This means that the number of hired farm\ud workers declines proportionally more than the wage rate increases.\ud With the knowledge of the readiness of capital for substituting for\ud hired farm laborers, any increase in real wage would increase the\ud rate of substitution of capital for hired farm labor. This in turn would\ud result in a reduction of total income and number for hired farm workers.\ud Only those with special skills and high job security would benefit\ud from such a policy