The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment
AbstractWe reassess the effect of state and federal minimum wages on U.S. earnings inequality, attending to two issues that appear to bias earlier work: violation of the assumed independence of state wage levels and state wage dispersion, and errors-in-variables that inflate impact estimates via an analogue of the well known division bias problem. We find that the minimum wage reduces inequality in the lower tail of the wage distribution (the 50/10 wage ratio), but the impacts are typically less than half as large as those reported in the literature and are almost negligible for males. Nevertheless, the estimated effects extend to wage percentiles where the minimum is nominally non-binding, implying spillovers. We structurally estimate these spillovers and show that their relative importance grows as the nominal minimum wage becomes less binding. Subsequent analysis underscores, however, that spillovers and measurement error (absent spillovers) have similar implications for the effect of the minimum on the shape of the lower tail of the measured wage distribution. With available precision, we cannot reject the hypothesis that estimated spillovers to non-binding percentiles are due to reporting artifacts. Accepting this null, the implied effect of the minimum wage on the actual wage distribution is smaller than the effect of the minimum wage on the measured wage distribution.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1025.
Date of creation: Nov 2010
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Wage structure; inequality; minimum wage;
Other versions of this item:
- David H. Autor & Alan Manning & Christopher L. Smith, 2010. "The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment," NBER Working Papers 16533, National Bureau of Economic Research, Inc.
- David Autor & Alan Manning & Christopher L. Smith, 2010. "The contribution of the minimum wage to U.S. wage inequality over three decades: a reassessment," Finance and Economics Discussion Series 2010-60, Board of Governors of the Federal Reserve System (U.S.).
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-LAB-2011-06-11 (Labour Economics)
- NEP-LTV-2011-06-11 (Unemployment, Inequality & Poverty)
- NEP-MAC-2011-06-11 (Macroeconomics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment
by maximorossi in NEP-LTV blog on 2011-06-16 13:04:27
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