In my recent podcast with Russ ("DJ Yiddisher Kop" is his rap name) Roberts, we discussed the problems caused by minimum wage. In particular, economic theory would clearly imply that forcing a higher than equilibrium wage would allow, in fact encourage, employers to take it out on employees on other margins. Abuse, discrimination in hiring, overwork, bad scheduling, etc.
And...well, what do you know?
Discrimination in a Low-Wage Labor Market: A Field Experiment
Devah Pager, Bart Bonikowski & Bruce Western
American Sociological Review, October 2009, Pages 777-799
Decades of racial progress have led some researchers and policymakers to doubt that discrimination remains an important cause of economic inequality. To study contemporary discrimination, we conducted a field experiment in the low-wage labor market of New York City, recruiting white, black, and Latino job applicants who were matched on demographic characteristics and interpersonal skills. These applicants were given equivalent résumés and sent to apply in tandem for hundreds of entry-level jobs. Our results show that black applicants were half as likely as equally qualified whites to receive a callback or job offer. In fact, black and Latino applicants with clean backgrounds fared no better than white applicants just released from prison. Additional qualitative evidence from our applicants' experiences further illustrates the multiple points at which employment trajectories can be deflected by various forms of racial bias. These results point to the subtle yet systematic forms of discrimination that continue to shape employment opportunities for low-wage workers.
Now, it's the ASR, so they would never make the connection. But discrimination and abuse is caused by the minimum wage. At the competitive wage, there would be NO economic space for discrimination. But the minimum wage creates a space for discretion.
The usual story is this: sure, MW may cause some unemployment, but the people who have jobs, they are better off, right?
Um, no. Back to school. Back to Econ 101.