Do Minimum Wage Increases Benefit Low-Income Households? Evidence from the Performance of Residential Leases
46 Pages Posted: 21 Dec 2018 Last revised: 5 May 2020
Date Written: May 4, 2020
We extend the debate on the benefits to increasing the minimum wage by examining the impact on expenses associated with shelter, a previously unexplored area. Our analysis uses a unique data set that tracks household rental payments. Increases in state minimum wages significantly reduce the incidence of renters defaulting on their lease contracts by 1.7 percentage points over three months, relative to similar renters who did not experience an increase in the minimum wage. This represents 32% fewer defaults. However, this effect slowly decreases over time as landlords react to wage increases by increasing rents.
Keywords: Minimum Wage Increase, Lease Defaults, Rental Market, Household Income
JEL Classification: G0, G13, G18, G28, R3, R31, R38
Suggested Citation: Suggested Citation