Rising Minimum Wages: Challenges to the U.S. Produce Industry

Abstract

The U.S. produce industry has been facing significant challenges due to rising minimum wages. This study proposes a modeling framework to analyze the impacts of rising minimum wages and assess their effects on the U.S. produce sector, focusing on the strawberry industry, which confronts both escalating labor costs and competition from low-cost imports. A structural model with a nested Synthetic Inverse Demand System (SIDS) is employed to analyze how wage increases affect the industry in both short and long terms. Our findings reveal that rising minimum wages will lead to a substantial increase in both the shipments (by 46%) and prices (by 23%) of strawberries from Mexico, the sole competitor of the US industry. As a result, the Mexican strawberry industry will see a significant revenue boost of $420 million (+ 79%). On the other hand, the U.S. strawberry industry could incur a potential revenue loss of up to $304 million (−17.9%). These results highlight the rough road ahead for the labor-intensive produce industry as wages rise in the United States.