Effects of Minimum Wage

EFFECTS OF MINIMUM WAGE 3

Effectsof Minimum Wage

Effectsof Minimum Wage

Thearticle “The Contribution of the Minimum Wage to U.S. WageInequality over Three Decades: A Reassessment”, outlines anevaluation of the effects of federal and state minimum wages on theearnings inequality in the United States. The authors acknowledgethat the elimination of minimum wage would increase inequality amongindividuals at the lower end of the spectrum. However, the effectsare seen as negligible in the case of men but are higher for women(Autor et al, 2010). The increased impact on inequality of femaleswould be attributed to the fact that women are overrepresented injobs that are low paid. Indeed, statistics show that women take upmore than 60 percent of the total number of workers within theminimum wage bracket, compared to less than fifty-percent of allworkers. Further, the authors show that minimum wage lowers net jobgrowth especially via its impact on job creation through theexpansion of establishments. This is especially in the case ofyounger workers or in industries that have high percentage oflow-wage workers (Autor et al, 2010). Of particular note is the factthat the estimated impact of minimum wage on varied wage distributionpoints go beyond the wage percentiles in which the minimum wage wouldbe non-binding, in which case there are spillovers. A structuralestimation of the spillovers indicates that there would be anincrease in their relative importance with a decrease in the bindingnature of nominal minimum wage (Autor et al, 2010). Further, theauthors show that the minimum wage comes with a higher value relativeto the median earnings in the case of women than men. This isattributed to the fact that the median wages are lower in the case ofwomen than their male counterparts.

References

Autor,D., Alan, M &amp Christopher L. S (2010). The Contribution of theMinimum Wage to U.S. Wage Inequality over Three Decades: AReassessment. Washington DC: Finance and Economics Discussion Series