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Abstract

Increasing the federal minimum wage is a major issue in the 2020 presidential campaign. This paper’s objective is to evaluate the impact of an increase in the minimum wage on an industry, eggs, where labor is a key input. This analysis was carried out using an equilibrium displacement model. When spread across the industry, the total negative effects due to increasing the minimum wage does not appear to be economically significant. This is due in large part to the Iowa egg industry’s current equilibrium wage of $13.50 an hour. Consequently, imposing a $15.00 an hour minimum wage would be a difference of only $1.50 assuming the egg industry does not increase it further. However, to stay competitive, egg industry employers would likely need to increase its wage to some level above $15.00 should the minimum wage be increased to that level. Despite these seemingly small effects, egg producers may nonetheless struggle in the short run to respond to immediate labor expenses should the state (or nation) not phase in its minimum wage over the course of several years. Most likely, if Iowa were to increase its minimum wage to $15.00 an hour, it would follow the lead of other states and incrementally increase its minimum wage over the course of many years until reaching $15.00.

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