Minimum Wages and Racial Disparities

Job losses and earnings reductions from minimum wage increases between 2005 and 2019 were much more prevalent for black workers, especially black men, and were minimal for white workers.

By David Neumark and Jyotsana Kala. Excerpt:

"Our research uses data from the American Community Survey between 2005 and 2019 to examine the effects of minimum wage increases on black workers and their relative impact compared with that of white workers. We studied not only teenagers—the focus of much existing research—but also other lower-skilled groups, including workers under the age of 30 and those without a high school degree.

Our findings indicate that job losses from minimum wage increases were much more prevalent for black workers, especially black men, and were minimal for white workers. For example, among black male workers under the age of 30 without a high school degree, a 10 percent increase in the minimum wage reduced employment by 4.1 percent on average. In contrast, our research finds no evidence of reduced employment for white workers with the same characteristics, even though the wages of both black and white workers increased by a similar degree.

Considering the wage and employment effects together, we found that higher minimum wages have decreased earnings for lower-skilled black workers. For example, within the same group of black male workers, a 10 percent increase in the minimum wage led to a 4.8 percent average reduction in earnings. In contrast, we found no evidence of reduced earnings for white workers with the same characteristics. In fact, for several of the lower-skilled groups we studied, minimum wage increases tended to increase earnings for white workers.

Because there is substantial residential segregation by race in the United States, the concentration of the minimum wages’ adverse effects on black workers implies that their adverse effects are also concentrated in heavily black neighborhoods. Indeed, our research finds that the adverse effects of minimum wage increases fell disproportionately on people of all races living in areas with a high black population share, worsening the adverse effects of minimum wages on black workers living in these areas relative to workers living elsewhere. In some cases, the accumulation of adverse effects for black workers and black neighborhoods implies that large differences in minimum wages could account for roughly 40 percent of the gap in employment rates for lower-skilled workers between areas with high and low black population shares."