From Workplace to Residence: The Spillover Effects of Minimum Wage Policies on Local Housing Markets

TL;DR

This paper investigates how local minimum wage policies influence nearby housing markets through commuting, revealing that wage increases lead to higher rents and that landlords benefit from these policy changes.

Contribution

It introduces a novel identification strategy using fine-grained timing of wage changes across ZIP codes to estimate spillover effects on rents.

Findings

A 10% increase in workplace MW raises rents by 0.69%.

Landlords capture about 10 cents of each dollar increase in MW.

Simulations show spatial variation in incidence on landlords.

Abstract

The recent rise of sub-national minimum wage (MW) policies in the US has resulted in significant dispersion of MW levels within urban areas. In this paper, we study the spillover effects of these policies on local rental markets through commuting. To do so, for each USPS ZIP code we construct a "workplace" MW measure based on the location of its resident's jobs, and use it to estimate the effect of MW policies on rents. We use a novel identification strategy that exploits the fine timing of differential changes in the workplace MW across ZIP codes that share the same "residence" MW, defined as the same location's MW. Our baseline results imply that a 10 percent increase in the workplace MW increases rents at residence ZIP codes by 0.69 percent. To illustrate the importance of commuting patterns, we use our estimates and a simple model to simulate the impact of federal and city counterfactual MW policies. The simulations suggest that landlords pocket approximately 10 cents of each dollar generated by the MW across directly and indirectly affected areas, though the incidence on landlords varies systematically across space.