Ag Labor Shortages Cost State Economy

Kansas State University and Kansas Department of Agriculture economists are reporting findings of a study indicating that alleviating a shortage of farm labor in Kansas could boost the state’s economy by as much as $11.7 billion.

“Accepting the status quo in the labor market is costly,” said agricultural economist Jenny Ifft, who is also K-State’s Flinchbaugh Agricultural Policy Chair.

She shared findings of a report that pegs the shortage of Kansas’ farm labor between 5,627 and 15,873 jobs over 72 agriculture and agriculture-related sectors present in the state – from grain farming and landscaping to meat processing and snack food manufacturing, among many others.

Ifft notes: “Between $2 billion and $6 billion in additional economic output could be generated in sectors affected directly if shortages in the labor market were filled.”

Taken further, shortages in agricultural labor create an additional 8,466 to 23,843 unfilled positions through indirect and induced effects, according to the report, which notes that “for each job in agriculture that remains unfilled, roughly 1.5 positions remain unfilled throughout the rest of the state’s economy.”

“We’re not just looking at production agriculture,” Ifft said. “Our model accounts for such things as, say, a farmer can’t get his grain to market in time (due to a labor shortage), which affects the number of employees a cooperative can hire, which then affects their spending with other businesses in the community.”

Parker Vulgamore, a K-State graduate student in agricultural economics and a co-author of the study, said that including indirect and induced effects, “Kansas could generate $4.1 billion to $11.7 billion additional output across the state’s economy if agricultural labor shortages were alleviated.”

The unrealized economic impact caused by labor shortages represents 1% to 2% of all Kansas economic output. In total, Kansas could add 39,000 direct and indirect jobs to the economy by filling agricultural shortages alone.

“More than 60% of the respondents to our survey reported having some degree of labor shortage, varying from 5% up to 60%,” Vulgamore said. “But the key point is that this isn’t a small issue affecting only one type of business or only one part of the state. It’s widespread. But on the flip side, there was about 40% of respondents that reported having no shortage, which means there are things we can do to combat this issue.”

Another study co-author – Kansas Department of Agriculture economist Tori Laird – applied a model known as IMPLAN to estimate sector-, industry-, and economy-wide effects based on current estimates of labor shortages.

“Anecdotally, we had heard from many agriculture businesses, farmers, ranchers, feed yards and cooperatives across the state that were talking about how they’re experiencing labor shortages and its effects on their individual businesses,” Laird said.

“But there wasn’t any individual effort being undertaken to look at the broader scale and scope of the impacts of labor shortages. There was no number to quantify the impact.”

Now, knowing the multi-billion-dollar impact, the researchers note that public and private entities can better understand the potential impact of continued work towards finding solutions.

“This study’s findings heighten the urgency for businesses and governments across all levels to address labor shortages,” Vulgamore said. “And I think the dialogue surrounding the issue has grown over recent years. There’s an array of policies and public goods that can help address shortages, and so hopefully this study and our findings can help inform some of the dialogue surrounding that.”

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The full report, titled Help Wanted: How Agricultural Labor Shortages Affect the Kansas Economy, is available to read online from K-State’s Department of Agricultural Economics.