The Impact of Minimum Wage on Income Inequality in the United States

Abstract

Income inequality has been growing since the early 1970s and will continue to grow until new legislation is put into place. This study looks at using minimum wage as a means of reducing income disparity in the United States. Firstly, this study will explain the negative impacts that income inequality has on citizens, the government and the economy. Second, a presentation of the theoretical framework of how minimum wage is able to impact unemployment and income inequality must be given. Third, an econometric regression will be used to determine the significance that real minimum wage has on the GINI Index, a measure of income distribution. This study finds that income inequality can be reduced by implementing a higher minimum wage law.