Minimum Wages and Homelessness

Abstract

Economic theory offers competing predictions about how minimum wage policies might affect homelessness. While minimum wages might reduce homelessness by raising incomes, they could also trigger employment disruptions and negative income shocks identified in the literature as proximate causes of homelessness. Policy effects might be heterogeneous because the risk factors for homelessness—substance abuse, mental illness, unstable support network, and so on—correlate with lower labor market competitiveness. Using synthetic and local-projection difference-in-differences methods with Department of Housing and Urban Development point-in-time counts, I find minimum wage increases between 2006 and 2019 led to more homelessness in American municipalities. This finding could help explain why homelessness surged in places that substantially increased minimum wages like New York, Seattle, and San Francisco while falling in localities with inflation-adjusted declines. Further analysis suggests employment effects more likely drove these increases than housing prices or migration. The findings highlight distributional consequences of minimum wage policies and add to our understanding of homelessness.