Browsing by Author "Keller, Andrew"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    The Impact of Increases to the Minimum Wage in the Egg Industry
    (2020-08) Keller, Andrew
    The United States (U.S.) egg production industry has undergone a structural change from a backyard industry in the 1940s to a highly-concentrated, large-scale production system. In large agricultural systems where production contracts are used, labor is a vital input in production. The productivity of this labor is a driver for managing profits. Thus, changes in the hourly price of labor and overall wage compensation, which includes social security, any health insurance or retirement contributions, and any variable compensation in the form of a bonus for achieving productivity or profitability targets, have an impact on the relative profitability of producers in such systems. The objective of this research is to analyze the impact of an increase in Iowa’s minimum wage for the Iowa egg industry. Labor is a significant input in egg production and Iowa is the leading egg-producing state. Knowledge of its effect on Iowa will help inform Minnesota egg producers since Minnesota is the thirteenth-leading egg producing state. The minimum wage has not been widely studied in the agricultural and applied economics literature and there are no widespread studies analyzing the policy proposals to increase the minimum wage. An Equilibrium Displacement Model (EDM) is created to analyze the welfare impacts of these proposed initiatives, and the model is consistent with long-run economic theory of production. The results show that the overall impact on the state’s egg industry is minor, especially if such a wage increase is spread out over several years. In general, for a new $15 an hour minimum wage, total egg production would likely fall by less than 1%, and the wholesale cost of eggs would increase by an amount between 1% and 1.5%. Similarly, the quantity of labor employed in the industry would decrease by an amount between 2% and 3%.