The Laffer Curve and Farm Labor

The New York Times has discovered the Laffer Curve! Has the esteemed liberal newspaper of record been bought by Rupert Murdoch? Has hell frozen over as a result of global warming?

Not quite. Though the Times has implicitly recognized the logic of the Laffer Curve, it took more than the plight of hedge fund managers and dot com billionaires to merit their notice. The disincentive of a mere 15% tax was not news fit to print. When a Colorado farmer was unable to find local laborers willing to pick onions, despite high unemployment rates, however, the New York Times took notice.

Unemployment and labor shortage at the same time. Something seriously stupid is going on. This prompted an in depth debate. Tom Lutz gave a pretty good answer:

First let’s do some easier math: the Colorado farmer is offering 10 bucks an hour. Say you’re a 50-year-old agricultural manager earning in the 75th percentile, or making $90,000 a year, and you are one of the 6,000 such managers to lose their jobs this year (as predicted for that job category by the Bureau of Labor Statistics for the next decade). You are eligible for a maximum of $13,000 in unemployment benefits. Even though it is not much, it would pay a year’s major medical coverage for your family as you try to get back on your feet. You might not want to screw up those payments in order to earn $400 a week for a seven-week harvesting season. Unless of course, you got paid under the table. Does making such a calculation mean you have a bad work ethic? Obviously not.

Unemployment insurance is not free money. You have to stay unemployed to collect. If you are unemployed anyway, this is a sunk cost. But as the Times noted, there are jobs out there: they just don’t pay enough to risk losing government benefits. The effective marginal “tax” rate is way higher than 15% or even 35%. It can be greater than 100% for those down on their luck.

Make the government benefits unconditional, however, and seasonal work becomes worth doing. Environmentalists take note: if you want your local foods and free range meats, you need cheap farm labor. Demand a high wage and/or job security for farm workers and the masses will opt for factory-farmed badness or food grown in poorer countries — food grown on what used to be rain forest.

Free money for all gives us affordable farm labor with a better life for those who pick our tomatoes. Harvest work is brutal work, suitable for short bursts only. Using migrants to follow the harvest is inhumane. Far better to hire locals who don’t have steady jobs. But to make that happen, we need to replace our sticky safety net with a safety trampoline.