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