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The effect of wage subsidies on piece rate workers: Evidence from the penny per pound program in Florida (Ku, 2019)

Review Guidelines

Absence of conflict of interest.

Citation

Ku, H. (2019). The effect of wage subsidies on piece rate workers: Evidence from the penny per pound program in Florida. Journal of Development Economics, 139, 122–134. doi:10.1016/j.jdeveco.2019.03.005

Highlights

  • The study’s objective was to examine the impact of Penny Per Pound (PPP) on daily hours worked. 

  • The author used a statistical model to compare the outcomes of workers at a Florida farm who were and were not affected by the program, using data from the farm’s payroll records and the National Oceanic and Atmospheric Administration’s National Climatic Data Center Global Surface Summary of Day Data. 

  • The study found that the PPP was associated with a 22 percent decrease in daily hours worked per field.   

  • The quality of causal evidence presented in this report is low because the author did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to PPP; other factors are likely to have contributed.

Intervention Examined

Penny Per Pound

Features of the Intervention

PPP is a program where buyers pay an extra cent per pound of tomatoes purchased from Florida-based growers. This subsidy is divided among the workers weekly, based on their relative output each week in terms of amount picked. This study examined the pilot phase of the program in early 2010 before it expanded throughout the state. 

Features of the Study

Workers who pick tomatoes at a Florida farm are paid a piece rate per pound of tomatoes picked. Each day they are asked to pick a particular variety of tomato. They are assigned to pick in a given field until its harvest is complete. Because workers earn a lower piece rate picking round variety tomatoes than grape variety tomatoes, the PPP subsidy is practically meaningful only for those who pick the round variety (equivalent to a 14 percent increase in the piece rate during the period studied, compared to a 2 percent increase in the piece rate for those who pick the grape variety). The author examined all workers at the farm who harvested either round or grape tomatoes during the two seasons before the introduction of PPP (spring 2008 and 2009) and the season after the introduction of PPP (spring 2010). The author used a statistical model to compare the daily working hours of workers who were and were not affected by the program (that is, those who picked round and grape variety tomatoes) before and after its implementation. Data came from the farm’s payroll records and the National Oceanic and Atmospheric Administration’s National Climatic Data Center Global Surface Summary of Day Data. 

Findings

The study found a negative relationship between PPP and daily hours worked per field. After the implementation of PPP, the daily hours worked per field among workers picking round tomatoes decreased by 22 percent relative to workers picking grape tomatoes. 

Considerations for Interpreting the Findings

The author did not account for other factors that could have affected the difference between the treatment and comparison groups. These differences—and not the PPP program—could potentially explain the observed differences in outcomes. 

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the author did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to PPP; other factors are likely to have contributed.  

Reviewed by CLEAR

May 2021