Do Minimum Wage Increases Benefit Low-Income Households? Evidence from the Performance of Residential Leases

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 10.6% fewer monthly defaults. However, this effect slowly decreases over time as landlords react to wage increases by increasing rents.

Agarwal, Sumit and Ambrose, Brent W. and Diop, Moussa, Minimum Wage Increases and Eviction Risk (December 5, 2021). Journal of Urban Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3283913 or http://dx.doi.org/10.2139/ssrn.3283913