Inequality in the unconditional distribution of observed wage rates in the U.S. rose substan-
tially during the 1980s, mostly in the lower tail of the distribution. The causes of this rising
wage inequality are obscured by the fact that concurrent decreases in the federal minimum wage
tend to increase observed wage inequality, regardless of its effect on employment. This study
uses regional variation in the relative level of the federal minimum wage to separately identify
the impact of the minimum wage from nation-wide growth in “latent” wage dispersion during
the 1980s. CPS wage data show a tight empirical relation between the relative level of the
federal minimum wage and dispersion in the lower tail of the wage distribution, across states
and over time. After accounting for the diminishing impact of the minimum wage during the
1980s, the evidence points to little or no increase in wage dispersion in the lower tail of the
wage distribution.
wage inequality
This paper analyses the distributional impact of the 1990 and 1991
increases in the federal minimum wage. The rise in the federal minimum wage
had very different impacts across states, depending on state-specific minimum
wage floors and the overall level of wages in each state. In states with a
higher fraction of workers affected by the minimum wage change, we find that
the minimum wage hike generated significant increases in the lower percentiles
of wages, and significant reductions in wage dispersion. The higher minimum
wage also led to increases in the lower percentiles of the family earnings
distribution, and a narrowing of the dispersion in family earnings. We find
some evidence that the increase in the minimum wage lowered poverty rates for
families with some attachment to the labor market.
More immigrants entered the United States during the l980s than
in any comparable period since the 1920s. Although at a national
level the inflow rates were relatively modest, most of the newly
arriving immigrants settled in only a handful of cities. In this
paper, we study the effects of immigration during the 1980s on the
evolution of wages within a sample of 24 major cities. We
concentrate on changes in wages for relatively low-paid workers,
and on changes in the gap between highly-paid and low-paid
workers. Our analysis reveals significant differences across
cities in the relative growth rates of wages for low-paid and
highly-paid workers. However, the relative growth rates of wages
at the low end of the earnings distribution bear little or no
relation to the relative size of immigrant inflows to different
cities.