Immigration Policy and Prices

When I've been asked about the effects of immigration reform, one answer I always give is that prices will increase. One reason produce is so cheap, for example, is that undocumented workers are being paid very low wages. Since picking fruits and vegetables is so taxing, if all workers are legal then farmers will have to raise wages significantly.

In California we're seeing a problematic wrinkle on this issue. In the absence of reform and in the context of harsh anti-immigrant policies, growers are offering higher wages and benefits but not getting takers.

Farmers say they're having trouble hiring enough people to work during harvest season, causing some crops to rot before they can be picked. Already, the situation has triggered losses of more than $13 million in two California counties alone, according to NBC News. 

The ongoing battle about U.S. immigration policies is blamed for the shortage. The vast majority of California's farm workers are foreign born, with many coming from Mexico. However, the PEW Research Center reports more Mexicans are leaving the U.S. than coming here.

This is the worst of all worlds. Crops rot, farmers get hit, workers don't have jobs, and prices go up.

Update: Minneapolis Fed President tells employers to shut up, stop whining, and just raise wages higher.