The contribution of the minimum wage to U.S. wage inequality over three decades: A Reassessment

David Autor, Alan Manning and Christopher L. Smith

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We 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.

Keywords: wage structure; inequality; minimum wage (search for similar items in EconPapers)
JEL-codes: E24 J3 J31 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/121701/ Open access version. (application/pdf)

Related works:
Journal Article: The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment (2016)
Working Paper: The contribution of the minimum wage to US wage inequality over three decades: a reassessment (2016)
Working Paper: The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment (2010)
Working Paper: The contribution of the minimum wage to U.S. wage inequality over three decades: a reassessment (2010)
Working Paper: The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment (2010)
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