When minimum wages increase, discriminating employers may try to avoid regulatory burdens by substituting away from disadvantaged workers. We test this hypothesis using a resume correspondence study with 35,000 applications around three ex-ante uncertain minimum wage changes. Before the increases, applicants with distinctively Black names were 19% less likely to receive a callback than equally qualified applicants with distinctively white names. Announcements of minimum wage hikes substantially reduce the callbacks for both types of applicants but shrink the racial callback gap by 80% for the subsequent year for which we have data. We interpret our results through a hiring model to show that the gap shrinks because white applicants are more likely to be marginal, partly due to statistical discrimination. We show how researchers or policymakers can use our framework, without policy variation, to predict how labor market policies will change racial disparities in other settings.
*This project has been supported by a grant from the W.E. Upjohn Institute Early Career Research Award