The minimum wage increases the gender wage gap at the bottom

Geoff Simmons is one of many to argue that the gender wage gap is smaller at the bottom end of the labour market because of the minimum wage. For example, the explanation of the Economic Policy Institute for greater gender pay equality at the bottom is the minimum wage:

The minimum wage is partially responsible for this greater equality among the lowest earners—it sets a wage floor that applies to everyone, which means that people near the bottom of the distribution are likely to make more equal wages. Also, low-wage workers are disproportionately women, which means that the minimum wage particularly bolsters women’s wages.

This is plainly wrong as a question of economic theory and political history. One effect of minimum wages is it lowers the cost of discrimination against the employment of less-preferred workers. Since the employer has to pay the minimum wage hour no matter whom he hires, the cost of discriminating on the basis of sex or race is less.


That is why South African whites at the beginning of and all through the apartheid era demanded that blacks be paid the minimum wage: they wanted to cheapen the cost of discrimination.

Minimum wages were initially introduced in the USA shortly after 1900 solely for women and children. The express aim was to price women out of jobs and raise men’s wages by enough so that they could provide for their families.

Tim Leonard in Protecting Family and Race The Progressive Case for Regulating Women’s Work showed that these women-only minimum wages were justified by political progressive including women on grounds that they would:

(1) Protect the biologically weaker sex from the hazards of market work;

(2) Protect working women from the temptation of prostitution;

(3) Protect male heads of household from the economic competition of women; and

(4) Ensure that women could better carry out their eugenic duties as “mothers of the race.”

These days some argue that minimum wages actually increase employment. Times change, and the slopes of supply and demand curves for labour must change with them.

If there is a minimum wage, the cost to employers of indulging their conscious prejudices or an unconscious bias are less. This is because a minimum wage set above the market clearing wage will cause unemploymentBecause jobs must be rationed, the costs of indulging a prejudice or succumbing to an unconscious bias are reduced and along with that the market mechanisms that wear down discrimination by employers.

Part of the explanation of the gender wage gap is interruptions in labour force participation because of motherhood reduces the time available to them for job shopping. The first 10 to 15 years of most careers, most working lives, is spent job shopping.

Job shopping is where wages grow through the accumulation of search capital. By moving between 6 to 10 jobs in their first 10 to 15 years in the workforce, a worker finds better and better matches for their skills and talents. They worked their way into the better paying job simply because they have had more time to find a good job match between the changing array of vacancies and their idiosyncratic set of skills and work history.

The minimum wage frustrates this job shopping by denying some women their initial stepping stone into the labour market both when they are a teenager and when they are returning from time spent caring for children. This is in addition to the minimum wage increasing the gender wage gap from reducing the costs of discrimination to employers.

The minimum wage reduces women’s opportunities to get a foothold in the labour market and build on that foothold through job shopping.

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  1. Trackback: The minimum wage increases the gender wage gap | The Libertarian Alliance Blog

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