The Minimum Wage and Regional Wage Structure: Implications for Income Distribution
Author(s)
Levin-Waldman, Oren M.
Abstract
The issue of the minimum wage in the United States is often couched as a debate between those arguing the youth disemployment effects on one hand and those arguing the potential benefits to those in poverty on the other. Because most minimum wage earners are teenagers, the argument goes, increasing the minimum wage to assist the poor would be badly targeted. Opponents of minimum wage increases are often quick to point out that only a small segment of the labor market, generally about 6 percent, earns the minimum wage. Therefore, the minimum wage should be considered nothing more than an insignificant issue not terribly relevant to the public debate. And yet, the minimum wage often engenders considerable political antagonism. The focus on the small portion of workers who earn the minimum wage, however, has obscured some critical issues. One of the most important of these issues is that the minimum wage as a labor market institution may have an important effect on the larger number of workers who earn from some point below the statutory minimum to some point above and hence on the community’s wage structure and distribution of income. My purpose in this paper is to show that as a labor market institution the minimum wage does affect different regions of the country differently and that this is all the more true when the minimum wage population is broadened to include those earning a wage within a range around the statutory minimum wage.
