Minimum Wages and Homelessness

I study minimum wage policies as a potential contributing factor to the persistent challenge of homelessness faced by American cities. Some risk factors of homelessness - substance abuse, unstable support network, mental illness - also make individuals less competitive in the job market. If minimum wage increases have differential effects that depend upon individual characteristics, negative consequences of minimum wages could fall disproportionately on cohorts already at risk of homelessness. Using synthetic and local-projection difference-in-differences methods and Department of Housing and Urban Development homelessness data, I find that minimum wage hikes led to increased homelessness in American municipalities between 2006 and 2019. Further analysis suggests that disemployment, but not migration to higher wages or inflation in rental housing prices, is a mechanism. The findings highlight the importance for homelessness of labor market conditions for at-risk populations and suggest more research on the distributional effects of minimum wage laws.