 and over the longer period from 1979 to 2009. The results in Table 4.41 confirm that the deterioration in the minimum wage’s value had a much larger impact on wages of women than of men. Between 1979 and 2009 the erosion of the minimum wage explained about two-thirds (65.5 percent) of the large 25.2 (log percentage point) expansion of the 50/10 wage gap among women but just over a tenth (11.3 percent) of the smaller 5.3 expansion of the 50/10 wage gap among men. For workers overall more than half (57.0 percent) of the increase in the 50/10 wage gap from 1979 to 2009 was accounted for by the erosion of the minimum wage. Curiously, the impact of the minimum wage on the 50/10 wage gap was less from 1979 to 1991 than from 1979 to 2009 even though the major decline of the value of the minimum wage occurred in the 1980s. Still, about a third of the 50/10 wage gap expansion among women from 1979 to 1991 can be explained by the falling value of the minimum wage.
The level of the minimum wage strongly affects the wage gains of low-wage workers, particularly low-wage women whose wages over the last few decades have essentially been set by the legislated minimum. Thus, the erosion of the minimum wage’s value (along with high unemployment) led to a precipitous drop in the wages of low-wage women in the 1980s and to a large increase in the 50/10 wage gap. Wages among low-wage women (i.e., at the 10th percentile) stabilized in the late 1980s after these wages had descended close to their lowest possible level (i.e., near the minimum wage, where employers could still possibly hire) and as unemployment dropped. Thereafter, the 50/10 gap was flat or declined as unemployment fell to low levels in the late 1990s and as the federal government implemented two sets of increases in the minimum wage in the 1990s. Between 1999 and 2006, as the real value of the minimum wage eroded and unemployment rose, wage growth of low-wage women once again weakened, and the 50/10 wage gap grew. The legislated increases in the federal minimum wage that took effect in 2007, 2008, and 2009 kept the 50/10 wage gap among women from rising despite higher unemployment.
The last decade has produced no improvement in real wages of a broad range of workers, including those with either a high school or college degree. It has also produced a widening divergence between overall productivity and the wages or compensation of the typical worker. In addition, wage inequality has continued to grow between those at the top and the rest.
The declining value of the minimum wage has played a key role in these trends. Setting the minimum wage at an appropriate level can help spur broad-based wage growth and move us toward an economy where workers benefit from productivity growth. Such policies are needed to reverse those policies that have strengthened the hands of employers and undercut the ability of low- and middle-wage workers to have good jobs and economic security.
If we want the fruits of economic growth to benefit the vast majority, we will have to adopt a different set of guideposts for setting economic policy, as the ones in place over the last several decades have served those with the most income, wealth, and political power. Establishing a higher minimum wage is an important piece of what is needed.
—Lawrence Mishel has been president of the Economic Policy Institute since 2002. Prior to that he was EPI’s first research director (starting in 1987) and later became vice president. He is the co-author of all 12 editions of The State of Working America. He has a Ph.D. in economics from the University of Wisconsin-Madison, and his articles have appeared in a variety of academic and non-academic journals. His areas of research are labor economics, wage and income distribution, industrial relations, productivity growth, and the economics of education.
Autor, David, Alan Manning, and Christopher Smith. 2010. The Contribution of the Minimum Wage to U.S. Wage Inequality Over Three Decades: A Reassessment. Massachusetts Institute of Technology Working Paper. http://economics.m