"Collective bargaining, the minimum wage, and the racial earnings gap" - Lorenzo Lagos, Princeton University and IZA

Feb 15, 1:20 pm2:35 pm
Event Description

Lorenzo Lagos is a postdoctoral research associate at the Industrial Relations Section during the 2020-2021 academic year.

"Collective bargaining, the minimum wage, and the racial earnings gap" (joint with Ellora Derenoncourt, Claire Montialoux, and Francois Gerard.)


This paper studies how wage floors affect racial earnings disparities. Our context is the Brazilian economy, characterized by persistently high racial disparities and a tradition of extensive sectoral bargaining. The paper is divided into two chapters: 1) on the effects of minimum wage increases between 1999 and 2009; and 2) on the effects of negotiated firm- and sector-specific wage floors between 2009 and 2017. This presentation will focus on the second chapter. Descriptively, nonwhite workers are less likely to be in occupations covered by an establishment’s primary wage floor, which partly contributes to the racial earnings gap. However, conditional on being in a covered occupation, increases in wage floors are associated with lower racial gaps. We then exploit large wage floor events following a bunching approach similar to Cengiz et al. (2019). We find no employment effects along the earnings distribution—overall and differentially by race. Future analyses will focus on spillover effects to uncovered firms as well as other margins of adjustment in response to wage floor increases, e.g., negotiated amenities, employment contract characteristics, etc.