Apples to Dollars

I think the reality is, if you look at a large number of jobs being done by people who come across illegally, they're doing jobs no one else wants to do. I guess you could pay, you know, 15 or 20 dollars an hour. But then an apple would cost, you know, $16. And that's not going to work economically.
Michael Chertoff

Now, for the record, I don't think that the former Secretary of Homeland Security really believes that apples would literally cost $16 a piece (even at Whole Foods) if growers paid high enough wages to entice American laborers to take the work. It's unlikely that the current migrant labor force that works to harvet fruit is paid less than a dollar an hour, which is what it would take to have apple prices be where they are (between about 35¢ and $1.30 each as of this afternoon in the Seattle area, depending on size and type). But the logic here is telling, because Mr. Chertoff is essentially asserting that we need to have a robust guest worker program to undercut the demands of the labor market.

Generally speaking, Mr. Chertoff, and others, are correct when they say that no one else wants to do these jobs (at the wages currently offered), although I've met Americans who once worked in the apple orchards of Eastern Washington. (Granted, when I met them they were panhandling after becoming too sick or injured to keep doing the work, but that's beside the point.) Even most of the migrant workers who do the jobs don't want their children doing them - that's why they send them to school to be educated, and support initiatives to grant in-state tuition to college students in the country illegally. Nobody puts the time, energy and money into a college degree to be a fruit-picker. Migrant laborers might consider picking apples in the Yakima Valley as a step up from doing the same work in Mexico, but it's not something that they aspire to; it's a step to a better life for their children.

When President-elect Donald Trump promised to build a "great" wall to cut off access to the United States from Mexico, and to prevent businesses from offshoring jobs to other nations, that resonated with people because of their impression that the point behind moving jobs was to create more profits for "business fat cats." Whether they understand it or not, they are directly contradicting Mr. Chertoff's understanding that they themselves are, in a way, part of the beneficiaries of the movement of jobs, because it lowers consumer prices. You could make the point that businesses would eat some of the higher cost of domestic labor out of their ill-gotten gains, and that the only effect would be a slowing in the rate at which they became wealthier, but that strikes me as a rosier view than is warranted.

But even given that, what would the effect of paying 15 to 20 dollars an hour for agricultural labor be? Back in 2013, people floated the idea that adding about 15 to 30% (depending on how you did the numbers), to McDonald's menu prices would allow the company to double salaries. Now I don't know what apple pickers make these days, but I'm going to randomly guess that to get them to Chertoff's guess at to what it would take to entice Americans to take the work would be a doubling of the cost, so that the apples that I looked at in the store today would run you from about 70¢ to $2.60 a piece. Still fairly pricey by today's standards, but a far cry from $16. Of course, the impacts don't stop there - those McDonald's prices are likely going to have to go up, as there will likely be at least some people who would rather pick apples for an average of $17.50 an hour than work for the 10 to 13 dollars an hour that fast food places around here tend to offer. And so the knock-on effects will begin, and they'll be somewhat unpredictable - at least to me, since I'm not a labor economist. But I'm guessing that some prices will go up, some wages will go up, and some jobs will simply be eliminated by automation. Over the past few months, the cafeteria where I work went cashless, and the people who once handled checkout all went away. It's likely that other jobs would follow suit if labor prices rose, leaving us with a trade-off; although it's likely only a matter of time in any event.

So in the end, the question becomes, what makes the economy work? Michael Chertoff says that we can secure the border, but we'll still have to find a way to legally import enough poverty to keep consumer prices from rising too quickly or too high. The localized waves of conservative populism that elected Donald Trump to the White House seem to believe that we can avoid importing poverty (and thus avoid the need to compete with it) by extracting profits from the wealthy. Looking at Mr. Trump's choices for cabinet positions, one might guess that he's aiming for a lighter regulatory and tax load, and counting on free-market competition, the Laffer curve and trickle-down economics to flow income down to the working classes. For my part I have no idea which (if any) of these will work. But for anything to work, we'll need a better idea of the factors involve than has sometimes been on offer.