A Living Wage? The Effects of the Minimum Wage on the Distribution of Wages, the Distribution of Family Earnings, and Poverty

Abstract

This paper analyses the distributional impact of the 1990 and 1991 increases in the federal minimum wage. The rise in the federal minimum wage had very different impacts across states, depending on state-specific minimum wage floors and the overall level of wages in each state. In states with a higher fraction of workers affected by the minimum wage change, we find that the minimum wage hike generated significant increases in the lower percentiles of wages, and significant reductions in wage dispersion. The higher minimum wage also led to increases in the lower percentiles of the family earnings distribution, and a narrowing of the dispersion in family earnings. We find some evidence that the increase in the minimum wage lowered poverty rates for families with some attachment to the labor market.