Study finds renters in states that raised their minimum wage during the first decade of the 2000s experienced fewer defaults than renters in states that did not raise their wage floor.
In the months after a state raises its minimum wage, fewer residents miss their rent payments, staving off the risk of eviction, finds a comprehensive analysis of U.S. residential leases forthcoming in the Journal of Urban Economics.
The paper, “Minimum Wage Increases and Eviction Risk,” also finds that when minimum wages go up, the default rate declines more for tenants with low monthly rent payments, compared with tenants who pay relatively high rents. The authors define a default as a tenant missing rent for a month, a potential precursor to eviction.
Rent is “one of the most important expenses that low-income households will face,” says Moussa Diop, one of the authors and an assistant professor at the University of Southern California, who studies rental markets.
By the end of the last decade, 46% of renting households used one-third of their income for housing, with some 24% of households putting more than half of their incomes toward rent, according to an analysis of U.S. Census Bureau data from the Joint Center for Housing Studies of Harvard University.
Diop and co-authors Sumit Agarwal and Brent Ambrose examine a sample of 984,376 leases signed from 2000 to 2009 in 39 states, 25 of which enacted minimum wage increases during that period. The leases covered 2,248 properties across 173...
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