Can A Higher Minimum Wage Rate Help Close The Persistent Racial Wage And Earnings Gaps?

November 2020

In this paper, I estimate the effect of minimum wage increases on the racial wage and earnings gaps between black and white workers in the United States, during the years 2000 to 2004. Using fixed-effects and a state-year trend model, I find that an increase to the minimum wage is associated with a 3.6% increase in black workers’ wages, almost double the increase experienced by white men, suggesting a narrowing of the racial wage gap. Conversely, white workers’ overall earnings increased by 1.1%, compared to only 0.78% for black workers. This result suggests that the minimum wage does not reduce overall racial economic disparities. I conclude that the overall benefits workers may receive from minimum wage increases are likely to be concentrated among white men.