My econometric estimates allow me to make several predictions about how rising temperatures will affect the agricultural labor sector. To do this, I develop a model of a firm choosing an optimal piece rate wage under some exogenous environmental condition .My model produces two interesting sets of comparative statics. First, I show that temperature’s effect on the optimal piece rate wage depends on how temperature affects labor productivity directly, and how temperature affects labor productivity’s responsiveness to the wage. Plugging my empirical estimates into this model, I find that an optimizing blueberry farm would pay its workers a higher piece rate wage on particularly cool days, ceteris paribus. Second, I show that temperature’s effect on overall farm profits has the same sign as temperature’s direct effect on labor productivity. In the case of California blueberry farms, where cool temperatures have meaningful negative effects on productivity, this suggests that the first-order effect of rising temperatures on profits is likely to be positive. However, in contexts where cool temperatures do not lower labor productivity, the opposite is likely to be true. The remainder of this paper is organized as follows: in section 1.2, I develop a simple theoretical model of workers’ optimal effort under a piece rate wage scheme. In section 1.3, I describe the institutional details of the two California blueberry farms I study in this paper. I then discuss my data and report summary statistics in section 1.4. Section 1.5 outlines my empirical strategy, and section 1.6 reports my results. I discuss my findings in section 1.7, giving particular attention to how rising temperatures are likely to affect the agricultural labor sector. Finally, in section 1.8, I conclude.

There has been relatively little theoretical work done on piece rate wage schemes in the past, partly because their structure is so straightforward,blackberries in containers and partly because they are so much less common than salaries or hourly wage schemes. Nonetheless, previous research has highlighted several important aspects of piece rate wages that are relevant to this paper. Prendergast and Brown both provide good summaries of when and where piece rates are likely to be effective. Specifically, in cases where firms can cheaply monitor productivity and ensure quality control, piece rates should correctly align workers’ incentives with those of their employer, maximizing labor productivity.10 Several papers have confirmed the prediction that, under the correct circumstances, piece rate wage schemes better incentivize labor productivity than do more traditional wage schemes. Lazear , studying an auto glass company, finds that a switch from hourly to piece rate wages boosts output per worker by an average of 44%. Shi , studying a tree-thinning company, estimates a more modest effect of 23%. Shearer , studying tree-planters in British Columbia, also finds an effect near 20%. Bandiera et al. study agricultural workers in the United Kingdom and come to a similar conclusion, noting that piece rates based on individual production eliminate cross-worker externalities found in relative incentive schemes. In a non-causal study from California, Billikopf and Norton also provide evidence that piece rate wages boost vine-pruners’ performance relative to hourly wages. Such increases in productivity under piece rates seem to come from increased worker effort, as Foster and Rosenzweig demonstrate by measuring workers’ net calorie expenditures under different pay schemes. None of the papers cited above, however, estimate how labor productivity responds to changes in a piece rate wage.Among the most well-known papers that have attempted to do so are Paarsch and Shearer and Haley . In both cases, the authors calibrate a structural model of worker effort in order to address piece rates’ endogeneity.

They find positive elasticities of effort with respect to wages, of 2.14 and 1.51 respectively, in line with theoretical predictionsOther papers have relied on natural experiments or natural field experiments to try and recover the effect of piece rate wage levels on productivity. For instance, Treble exploits a natural experiment from the 1890s in an English coal mine to derive a nearunit-elastic productivity response. In a more recent setting, Paarsch and Shearer implement a natural field experiment with tree-planters in British Columbia and estimate a productivity elasticity of 0.39. While the authors note that this estimate is “substantially smaller” than that of Paarsch and Shearer and Haley , it is unclear wether they think this result invalidates the earlier estimates.Finally, Guiteras and Jack conduct an experiment in rural Malawi to explore how variation in piece rate wages affects both quantity and quality of worker output. Despite the theoretical simplicity of a piece rate wage scheme, it is not immune to employees’ behavioral responses. Even though a firm may be able to set a different piece rate every day, doing so may foment unrest among employees if the changes are seen as arbitrary . In other situations, high piece rates may operate as efficiency wages – à la Yellen , Shapiro and Stiglitz , and Newbery and Stiglitz – especially if a firm is trying to retain high-quality workers . An additional consideration is that variable piece rate wages may lead to a less reliable supply of labor on the intensive margin. In other words, piece rate employees may work fewer or more hours depending on the day’s wage. Such behavior would be consistent with a reference-dependent preference model like that of Kőszegi and Rabin where workers have some internal reference point for how much money they intend to earn in a particular day.Finally, piece rate wages are much more common in seasonal specialty agriculture than in many other industries or settings. Tasks such as picking, pruning, or planting can be easily measured and tracked, making piece rates feasible. In these cases, productive workers can earn considerably higher incomes under a piece rate scheme than under an hourly wage scheme: Moretti and Perloff find that US agricultural workers paid by piece rate earn 26% more than their hourly counterparts. This number is slightly misleading, and certainly not causal, considering that workers select into particular work in part based on the compensation scheme. Rubin and Perloff note that piece rate workers tend to be disproportionately young or old: “[a]pparently, prime-age workers find that higher earnings in piece-rate jobs do not compensate for the difficulty of more intensive effort, more variable incomes, and possible greater injury risk or shortened farm-work career” . However,these selection issues are irrelevant if the goal is to understand how piece rates affect the productivity of workers who select into such work in the first place. Harvesting fresh blueberries is a labor intensive process. Berries grow in small bunches and ripen at differing times. This means that a single blueberry bush can be harvested multiple times each season. However, since each berry-bunch contains both ripe and unripe berries, pickers must harvest fruit carefully by hand. Mechanized blueberry harvesters exist, but they are imprecise and are used primarily for harvesting berries destined for the processing market.Berry-pickers collect fruit in small buckets fastened on the front of their bodies. Once the buckets are full,blackberry container the workers carry their harvest to a weigh-station at the end of a field row. Workers pour their berries into standardized bins which are then weighed, packed into trucks, and driven to a refrigerated packing plant. Because blueberries are delicate and perishable, they must be refrigerated quickly after being picked. When workers bring their berries to be weighed, a foreman closely watches the process to ensure quality control. If a picker’s fruit is intermingled with too many twigs, leaves, or unripe berries, the foreman will warn the picker that their quality must improve to keep their job.

The farms I study both utilize an automated system to track workers’ productivity and calculate payroll.Each picker is given a unique barcode that they wear as a badge, and each fruit tray is assigned its own barcode as well. When a picker brings their fruit to be weighed, the weigher scans both the picker’s barcode and the tray’s barcode to record the tray weight. The picker then receives a receipt of their weigh-in. The farmer likes the barcode system because it is quick, automatic, reliable, provides real-time data, and replaces a cumbersome paper-and-pencil system. Pickers like the barcode system because they are able to witness the fruit-weighing and are thus confident that the farmer is paying them honestly for the fruit they pick. At the beginning of each work day, around 6:00 or 6:30 a.m., the farmer sets the day’s piece rate wage and posts the wage in a public spot for all workers to see.Workers are paid the piece rate for each pound of berries they harvest, and the rate does not change throughout the day. The piece rate does, however, change over the course of the season . As fruit becomes more abundant on the bushes through May and June, picker productivity rises. Farmers therefore generally lower the piece rate wage throughout the season as more and more berries ripen. Anecdotally, farmers say they lower their piece rates “when there’s a lot of fruit in the field” with the goal of maintaining a relatively stable effective hourly wage for the average berry picker.If any one worker picks a small enough quantity of fruit that their effective hourly wage for the day falls below the legal minimum wage, the farmer pays them according to the hourly minimum wage. In these cases, the farmer often then gives the picker in question additional training and a warning that they may be fired if they do not quickly improve. Anecdotally, the hourly minimum wage is most likely to bind during a new employee’s first few days on the job as they develop their skills as a fruit picker. If a worker consistently falls below the minimum wage cutoff, they frequently quit on their own accord or are effectively fired and asked not to return the next day. Because blueberries are delicate and highly perishable, they are not bought and sold in a central commodity market. Instead, individual producers set short-term contracts with different marketers or buyers to provide a certain quantity of berries in particular packaging at a particular time. These contracts are set on a near-daily basis, and prices can change quickly throughout the season. While there is certainly some quality differentiation within the blueberry market, buyers and marketers view different producers as close substitutes. This means that individual producers have relatively little, if any, market power. I thus take California blueberry contract prices as an accurate reflection of a competitive market price for blueberries in the state. Blueberry prices in California are highly seasonal: prices are quite high at the beginning of the season in April, and much lower near the end of the season in June. This seasonality in price is largely explained by variation in aggregate production throughout California, and variation in the availability of blueberries from other global producers. In the early spring, the United States imports fresh blueberries at high prices from Mexico or other countries since domestic production is agronomically infeasible. By mid-to-late-June, farms in northern states such as Washington, Oregon, and Michigan begin to produce berries in large quantities, driving down the market price. California blueberry farmers therefore face a relatively short season when it is profitable to harvest and sell their fruit. While blueberry bushes continue to yield berries through June and into July, labor costs are too high relative to market prices at that time for California farmers to justify continued production. To summarize, the California blueberry season begins agronomically, but ends economically. Organic blueberries regularly command a price premium of around two dollars per pound. While the harvesting process is identical for conventional and organic berries, organic bushes produce fewer berries per bunch. Thus, pickers of organic berries spend more time finding and harvesting berries than do their conventional counterparts. Additionally, fruit quality is more variable in organic blueberries. This leads to a smaller proportion of berries ultimately reaching market. As described in the previous section, the farms I study use a digital fruit weigh-in system to track worker productivity and generate payroll data. I utilize data from these weigh-ins to conduct my analyses.