Finding The Opportunity In Changing Circumstances

Originally printed in the February 2018 issue of Produce Business.

Juliet Samuel, writing recently in The Telegraph, published a piece titled “Britain must pay the price for living off the fruits of cheap EU workers.” In the article, the author wrote:

There is no better fruit in the world than a ripe, English strawberry. This being my preference, the possibility of a labour shortage brought on by a recovering eurozone and post-Brexit restrictions is probably not in my interests. Despite the complaints by business though, it may well be in Britain’s interests.

We can leave aside for the moment the odd penchant in England for always declaring their produce the best in the world. Having worked closely with the English, I have really come to admire many industry members and enjoy their company. I consider many members of the industry close friends. It is, however, not wise to say things for which there is no evidence. If you were to read the comments to the story, you would see that even in the United Kingdom, there are people lobbying for the superiority of Scottish strawberries. Others speak in favor of Norwegian strawberries. And the same industry that grows the English strawberry has extensive investments in Spain and elsewhere growing strawberries.

It is not a trivial point, because the gist of Ms. Samuel’s piece is that wages are likely to rise if the use of EU labor is restricted because of Brexit. As she says, this is in “Britain’s interest.”

Britain, of course, as with the United States or any country, has many, often-conflicting interests. On the one hand, most countries would like to see real wages rise. This means the population is more prosperous. In America we would say these higher wages make them better able to “pursue happiness” — a principle enshrined in our founding Declaration of Independence. One could argue that an important purpose of national economic policy is to keep real wages rising. The word “real” though is important. The value of wages must always be judged in relationship to costs. If wages double and the cost of living doubles, there is no real gain. In fact, when the cost of living increases, some people, say pensioners on fixed incomes, become poorer.

So rising wages, which increase the price of Ms. Samuel’s favored strawberry — and presumably many other things — may not be a net gain for the economy at all. It is typically only wage gains driven by productivity increases that increase prosperity.

Of course, there are other options than simply raising the price of British strawberries. If costs rise in Britain because of labor restrictions, this will make other sources more competitive. Now, if English strawberries were noticeably better in quality than strawberries grown in Spain, Norway, America, Mexico or any of a dozen other places, then perhaps consumers gladly would pay a premium. Again, though, the evidence for this is quite slight, certainly on a mass scale. So, the likely consequence of restricting foreign workers from harvesting in England — or any country — is foreign workers will harvest the produce in some other country, and the produce will be shipped rather than the labor.

There are so many half-truths in these stories that it is hard to keep track. It is said these jobs are difficult or impossible to automate. But this is a function of price. We have machines that can do delicate operations on human beings; we can probably develop machines that can harvest. But it doesn’t pay to do so if inexpensive labor is available.

It also is said that citizens in affluent countries just won’t do this work. But work itself often must change to attract labor. When my family operated a produce importing division, we went heavily into tropicals because we couldn’t hire top-notch employees to work only during the Chilean season. In other words, we had to change the job we offered by providing year-round employment to get people available when we really needed them.

One important question the industry must assess is the externalities associated with immigrant laborers. In our sister publication, Jim Prevor’s Perishable Pundit, we ran a letter from an important industry leader on the buy side, and he said this:

And we haven’t attributed the correct cost to our cheap labor. Thirty percent of California prison inmates are in the country illegally. There are 20 murders per year in Salinas, a city of 150,000 people. The city spends almost $1 million on a gang task force every year. These are social costs that are borne by all the citizens of the city and state, and these aren’t accounted for in the cost of the produce.

This is, perhaps, the biggest long-term challenge to an industry effort to maintain access to immigrant labor. The global trend expressed in both Brexit and the election of Trump is in part an expression of concern that there are costs to immigration and to guest worker programs that are not fully captured by the supply chain. It is an industry responsibility to make sure the immigration policies it advocates account for these extra costs. Externalities aside, from an economic standpoint, what Britain should do is use its exit from the Common Market as an opportunity to find cheaper labor. Instead of bringing in Eastern Europeans, open the doors to Africans, Asians and Latin Americans. In other words, Britain should broaden its thinking and not be constrained by EU rules; the country should get the best labor available at the lowest price.

This would allow the industry to grow, pack and ship produce less expensively, thus increasing the real value of the wages earned by British workers. It would make British farming more competitive in global markets, and it would turn Brexit from a labor problem for British farmers to an opportunity.