University of Maryland
Sociology 441: Stratification 

The minimum wage as a cause of growing inequality

Theory:

When the legal minimum wage rises, it pulls up the bottom of the wage distribution, thus lowering inequality. Conversely, inequality grows when the minimum wage is allowed to fall (usually because Congress fails to change the dollar value so inflation eats away at the real purchasing power of the minimum wage)

This effect of raising the minimum wage is felt not only by workers who are earning the minimum wage but also by those workers earning slightly more than the minimum. For example, if the minimum wage rises from $5 to $5.50, employers will often also raise the wages even of workers who had been earning $5.75. They are not legally required to do so, but they may want to keep some wage difference for those workers above the minimum.

Evidence:

Danziger and Gottschalk cite two types of evidence to evaluate this idea:

For other sources on the minimum wage:


 
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Last updated March 1, 2000
comments to: Reeve Vanneman. reeve@umd.edu