Minimum Wages and Housing Rents: Theory and Evidence from Two Countries

Yamagishi, Atsushi (2019): Minimum Wages and Housing Rents: Theory and Evidence from Two Countries.

Abstract

Whether the minimum wage is an effective redistributive policy is still controversial. I investigate this issue from a new perspective by focusing on the effect of minimum wage hikes on housing rents. It is informative for two reasons. First, if minimum wage hikes increase housing rents, some of the benefits accidentally fall on homeowners rather than workers. Second, housing rents serve as an indicator as to whether and how much minimum wages are beneficial for workers, which I show by developing a spatial equilibrium model. I empirically analyze the causal impact of the minimum wage increase on housing rents in the United States and Japan. In both countries, minimum wages hikes increase housing rents in urban areas: 10% minimum wage increase induces 1%-2% increase in the United States and 2.5%-5% increase in Japan. While the unintended incidence on homeowners is arguably moderate, it is non-negligible. Moreover, it may be more salient if minimum wages induce unemployment. I also suggest the importance of heterogeneous welfare impacts on different groups of minimum wage workers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Minimum Wages, Housing Rents, Incidence, Capitalization, Heterogeneous Workers
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R38 - Government Policy

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