Minimum wages reduce gender and racial income gaps

The argument

A minimum wage does not raise everyone's pay. It raises the pay of people at the bottom of the distribution, so the question of who benefits from it is really a question about who is at the bottom — and in the US that population is not demographically representative. Take gender first. Women account for roughly 49% of the US labour force, but make up 55% of workers earning less than $10.10 an hour. The two figures matter only in relation to one another: women are close to half of all workers, yet they are more than half of the lowest-paid ones, so their share of the group a wage floor reaches is larger than their share of the workforce as a whole. The same gap appears by race and ethnicity. Around 13% of the US population is black or African American and 18% are Hispanic or Latino, yet 22% of families earning less than 200% of the federal poverty level are black, and 30% are Hispanic. In each case the share among low-income families exceeds the share of the population, and in the second it is substantially larger. The inference follows from the arithmetic of the policy. A measure that lifts wages at the floor delivers its gains in proportion to how heavily a group is concentrated there. Because women and minorities are overrepresented among the lowest earners, they stand to gain the most from policies affecting the minimum wage, taking a share of the increase larger than their share of the workforce or the population. The consequence is distributional. Raising the floor narrows the distance between the groups clustered at the bottom and everyone above them, so the minimum wage acts on gender and racial income gaps directly, without having to be designed as a measure aimed at either.

Context

The establishment of a minimum wage benefits the lowest earners in the labour pool. These are overwhelmingly women and ethnic minorities.

Premises

Counter-arguments

Overrepresentation at the bottom cuts both ways. A higher minimum wage raises pay for low-wage workers who keep their jobs, but if it also reduces employment or hours, the women and minority workers concentrated at the bottom would bear a disproportionate share of those losses too. The same fact the argument relies on — that these groups cluster in low-wage work — means they are also the most exposed to any disemployment effect. So the data show who is affected by minimum-wage policy, not that the net effect is unambiguously to narrow gender and racial income gaps.

Rejecting the premises

[Rejecting P2] Concentration at the bottom means these groups also absorb more of any job or hour losses from a higher minimum wage, so the net effect on income gaps is ambiguous rather than clearly positive.