Why minimum wages are a critical tool for achieving racial justice in the U.S. labor market, October 2020 By Ellora Derenoncourt, Claire Montialoux, and Kate Bahn

The minimum wage is one of the primary tools for raising the wages of low-income workers. This was the case at its inception in some states in the early 20th century, as a key federal component of the New Deal reforms during the Great Depression, and today, amid the coronavirus recession. Importantly, though, reforms in the 1960s turned the minimum wage into a critical tool for decreasing the wage divides between Black and White workers because Black Americans were overrepresented among low-wage workers who were not initially covered by the federal minimum wage. Yet those reforms six decades ago are now increasingly unable to address racial income inequality without keeping pace with inflation and economic growth. Indeed, the coronavirus recession demonstrates how persistent disparities in economic security by race and ethnicity are exacerbated in a crisis. Black and Latinx households today are more likely to report a loss in in-come and difficulty paying expenses. And the tenuous partial recovery of the U.S. labor market since the start of the current recession now appears to have stalled, leaving Black and Latinx workers with significantly elevated unemployment in the double digits. Research from previous economic downturns highlights how these racial income disparities will not be alleviated by market forces in the eventual post-pandemic recovery. Centering racial justice in economic policy is critical to ensuring broadly shared growth in the future. This issue brief shows how minimum wages were and remain an important tool for racial justice. We first examine the role of minimum wages today in perpetuating the current racial income divide. We then review who was covered historically by minimum wages, and how the changing real value of minimum wages over time and across geographic divides reflect continued structural racism. We then close with an analysis of what it would mean for economic security of Black and Latinx families to increase the federal minimum wage closer to a living wage.