Growing Wage Inequality, the Minimum Wage, and the Future Distribution of Retirement Income

Research Report

Growing Wage Inequality, the Minimum Wage, and the Future Distribution of Retirement Income

Abstract

This study examines how rising wage inequality and a boost in the federal minimum wage might affect future retirement income. Projections from DYNASIM, the Urban Institute’s dynamic microsimulation model, show that if the wage gap between college and high school graduates continues to grow, retirement incomes for high-wage workers would rise, worsening income inequality at older ages despite Social Security’s progressive benefit formula. Raising the federal minimum wage to $12 per hour and subsequently adjusting it for inflation would boost lifetime earnings and future retirement income for low-wage workers but would not eliminate the projected increase in retirement income inequality.

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