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The Contribution of the Minimum Wage to U.S. Wage Inequality Over Three Decades: A Reassessment

The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment

Income Distribution, January 2016

The authors reassess the effect of min­i­mum wages on US earn­ings inequal­i­ty using addi­tion­al decades of data and an IV strat­e­gy that address­es poten­tial bias­es in pri­or work. They find that the min­i­mum wage reduces inequal­i­ty in the low­er tail of the wage dis­tri­b­u­tion, though by sub­stan­tial­ly less than pre­vi­ous esti­mates, sug­gest­ing that ris­ing low­er tail inequal­i­ty after 1980 pri­mar­i­ly reflects under­ly­ing wage struc­ture changes rather than an unmask­ing of latent inequal­i­ty. These wage effects extend to per­centiles where the min­i­mum is nom­i­nal­ly non­bind­ing, imply­ing spillovers. They are unable to reject that these spillovers are due to report­ing arti­facts, how­ev­er.