An Analysis of Labor Demand and Supply in the Sugarcane Industry of Puerto Rico

Abstract

Farm-labor demand and supply relations were estimated for the agricultural sector of the sugarcane industry. The analysis is based on time-series data for the period covering 1950-51 to 1965-66. A linear regression model was used because of its suitability and convenience. The results indicated that about 89 percent of the variation (R² = 0.8908) of farm-labor requirements could be accounted for by the combined effects of: 1, Annual acreages of sugarcane grown; 2, labor productivity per man-day; and 3, average wage for hired farm-labor. The equation for the postulated functional relationship indicates that an increase of 1 acre of sugarcane land is associated with an increase in demand of 16.23 man-days of farm hired labor. In the opposite direction, an increase in labor productivity of 0.10 of cane per man-day and $1 in average daily wage tend to reduce farm labor demand by 902,800 man-days and 1,809,500 man-days, respectively. On the other hand, it was postulated that the quantity of labor available to the agricultural sector of the sugarcane industry is a function of: 1, Average daily wage paid for hired farm labor; 2, population change; and 3, period of time. The estimated response function strongly supported this postulation. About 96 percent of the variation (R² = 0.9596) in labor availability in the agricultural sector of the sugarcane industry is explained by these three variables. Both factors, population growth and higher wages for hired farm labor, tend to increase labor availability in the agricultural sector of the sugarcane industry, but in the long run, changing conditions related to time cause the opposite. For instance, an increase of $1 in average daily wage for farm labor and one unit change in the index of population are associated, respectively, with an increase of 854,000 and 367,000 man-days in the quantity of labor available. But, over time, labor availability in this sector of the sugarcane industry is associated with a reduction of 1,607,000 man-days according to the estimated response function.