Environmental Economics: Daily Demand and Supply: Government prevents entire island population from getting crabs*

May 17, 2018

Daily Demand and Supply: Government prevents entire island population from getting crabs*

This community voted overwhelmingly for Donald Trump. But now his immigration changes are killing its livelihood — legendary crabs that are a mainstay of the local economy and a regional delicacy.

For decades, Hoopers Island, known for its crabbing industry, has relied on a federal seasonal work program — known as H-2B visas — to keep its businesses humming. This has allowed employers to hire foreigners, mostly Mexican women, to come temporarily to pick crab meat.

But this year, the cap on H-2B visas — and a shift from the first-come, first-served based model to a lottery system that has disadvantaged Hoopers Island seasonal workers — has left the island without 40 percent of the visas they have needed in the past.

Wages for crab-picking will increase. A decrease in supply of crab-pickers will cause the equilibrium price of crab-pickers to increase. Those crab-pickers who are hired will get higher wages.
The number of domestic crab-pickers will increase. At higher wages, the number of domestic crab-pickers willing to work will increase. Since the supply of foreign crab-pickers has been reduced, a part of the shortage of workers will be filled by drawing new domestic crab-pickers into the crab-picking jobs.
The total number of crab-pickers will decrease. As with any decrease in supply, the equilibrium quantity of workers in the crab-picking market will decrease as the supply of workers decreases. The gain in domestic workers is more than offset by the loss of H2B workers.

So in the market for crab-picker we will have higher wages for more domestic workers, with fewer H2B workers in the market, and lower total employment among all crab-pickers. SO if you are a protectionist, this doesn't sound all bad. We have more domestic workers employed at higher wages. Right?

Well, sort of. We also have to think about what else happens.

Right now we have full employment. With full employment, those domestic crab-pickers have to come from somewhere. The only place from where they can come are other, similar, jobs. SO another effect is:

A decrease in supply of H2B workers in the crab-picking industry will decrease the supply of domestic workers in other industries--driving up those wages as well.

But workers getting paid more is a good thing, right?

Sort of, but we have to remember that workers are an input into the production of outputs. When the price of an input increase, the supply of the output decreases. This means:

A decrease in the supply of any output for which wages have gone up will see higher prices and lower quantities produced/consumed. The decrease in the supply of labor will cause higher crab (and other food goods) prices.

For reference, here's the current price of crabs at a Baltimore area restaurant:

Posted by Tim Haab on May 17, 2018 at 02:27 PM in Attempt at humor, Demand and Supply, Food and Drink, Government Policy, Policy Costs, Travel, Wildlife Resources | Permalink

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From NBC.com:

This community voted overwhelmingly for Donald Trump. But now his immigration changes are killing its livelihood — legendary crabs that are a mainstay of the local economy and a regional delicacy.

For decades, Hoopers Island, known for its crabbing industry, has relied on a federal seasonal work program — known as H-2B visas — to keep its businesses humming. This has allowed employers to hire foreigners, mostly Mexican women, to come temporarily to pick crab meat.

But this year, the cap on H-2B visas — and a shift from the first-come, first-served based model to a lottery system that has disadvantaged Hoopers Island seasonal workers — has left the island without 40 percent of the visas they have needed in the past.

Wages for crab-picking will increase. A decrease in supply of crab-pickers will cause the equilibrium price of crab-pickers to increase. Those crab-pickers who are hired will get higher wages.
The number of domestic crab-pickers will increase. At higher wages, the number of domestic crab-pickers willing to work will increase. Since the supply of foreign crab-pickers has been reduced, a part of the shortage of workers will be filled by drawing new domestic crab-pickers into the crab-picking jobs.
The total number of crab-pickers will decrease. As with any decrease in supply, the equilibrium quantity of workers in the crab-picking market will decrease as the supply of workers decreases. The gain in domestic workers is more than offset by the loss of H2B workers.

Well, sort of. We also have to think about what else happens.

A decrease in supply of H2B workers in the crab-picking industry will decrease the supply of domestic workers in other industries--driving up those wages as well.

But workers getting paid more is a good thing, right?

Sort of, but we have to remember that workers are an input into the production of outputs. When the price of an input increase, the supply of the output decreases. This means:

A decrease in the supply of any output for which wages have gone up will see higher prices and lower quantities produced/consumed. The decrease in the supply of labor will cause higher crab (and other food goods) prices.

For reference, here's the current price of crabs at a Baltimore area restaurant: