Sociology 441: Stratification

The minimum wage as a cause of growing inequality

Evidence: group differences

Danziger and Gottschalk also cite evidence that questions how important the minimum wage is for explaining inequality (p.129).

Wage inequality is growing even within low education groups and also within high education groups. That is, if we look only at high school dropouts, the gap between the worst paid dropouts and the best paid dropouts has grown during the last twenty years. The minimum wage theory does help explain this. The wages of the worst paid high school dropouts are probably near the minimum wage and so lowering the (real value of) the minimum wage would increase the gap.

But, the earnings gap between the worst paid college graduates and the best paid college graduates has also grown over the last twenty years. It is unlikely that the minimum wage could explain this type of growing inequality. Even the bottom quintile of college graduates earns well above the minimum wage. So the growing inequality within college graduates has to be explained by something else.

If the minimum wage were an important cause of growing inequality, then we should expect that inequality would have grown faster among high school dropouts than among college graduates. Since this hasn't happened, that is more evidence against the minimum wage explanation of inequality.

This type of reasoning: looking at changes within particular groups of workers, is also used in evaluating other explanations of inequality. Danziger and Gottschalk use it in evaluating:

• de-industrialization,
• de-unionization, and
• cohort size
explanations.