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

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Brent W. Ambrose

Pennsylvania State University

Moussa Diop

University of Southern California

Multiple version iconThere are 2 versions of this paper

Date Written: May 4, 2020

Abstract

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

Agarwal, Sumit and Ambrose, Brent W. and Diop, Moussa, Do Minimum Wage Increases Benefit Low-Income Households? Evidence from the Performance of Residential Leases (May 4, 2020). Available at SSRN: https://ssrn.com/abstract=3283913 or http://dx.doi.org/10.2139/ssrn.3283913

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Brent W. Ambrose

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

Moussa Diop (Contact Author)

University of Southern California ( email )

Sol Price School of Public Policy
RGL 315
Los Angeles, CA 90089
United States
(213)821-0467 (Phone)

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