Poster #111 - The Minimum Wage's Impact on Racial Inequality in Female Hourly Wages and Weekly Earnings

• In Event: Friday Poster Reception

Abstract

This paper examines the minimum wage’s differential impact by race on female inequality in hourly wages and earnings. The minimum wage should reduce racial hourly wage inequality. Assuming the minimum wage’s effect on hourly wages encompasses a wider range of the hourly wage distribution for African American or Hispanic women, the minimum wage would reduce racial inequality at the bottom of the hourly wage distribution. In contrast, the implications of the minimum wage for racial earnings inequality are ambiguous. Even if the hourly wage gains  disproportionately accrue to non-white women, firm labor input adjustments to the minimum wage could asymmetrically affect racial minorities negatively.

This paper assesses the minimum wage’s impact on racial inequality across the distributions of hourly wages and weekly earnings for women. Data from the CPS allow the creation of state-year female hourly wage and  weekly earnings distributions by race. Consistent with the IV strategy of Autor et al. (2016), the paper exploits state-by-year variation in the effective minimum wage to estimate the minimum wage’s marginal effect on within-group and across-group racial inequality in female labor markets. There are five primary results consistent with nonwhite women differentially benefiting from the minimum wage’s effect on racial inequality. First, the minimum wage compresses the nonwhite female hourly wage distribution through the 30th percentile but only up to the (18th) percentile for whites. Second, raising the effective minimum wage by a log point closes the white-nonwhite hourly wage gap by 1.5 log points between the 5th and 10th percentiles. Third, the minimum wage reduces nonwhite female earnings inequality through the 35th percentile but only up to the 18th percentile for whites. Fourth, a log point increase in the effective minimum wage shrinks the white-nonwhite hourly wage gap by a log point between the 5th and 15th percentiles. In contrast to the earnings estimates, the hourly wage inequality results are not sensitive to robustness checks that account for changes in employment  composition. Finally, the Chernozhukov et al. decomposition implies that increasing the minimum wage up to $15/hour would significantly reduce the unexplained component of the white-nonwhite wage gap below the median.

Author

• Krieg Isaac Tidemann, Niagara University
  Presenting Author