City Minimum Wages and Spatial Equilibrium Effects

Abstract: This paper studies the effect of minimum wage changes on spatial equilibriums in local labor markets. Using data for the U.S. and minimum wage variation across state borders, I analyze how commuting, residence, and employment locations change in response to local minimum wage changes. I find that areas where the minimum wage increases receive fewer low-wage commuters. I formulate a spatial equilibrium model and calculate counterfactuals with a higher minimum wage for U.S. cities considering an increase. For small minimum wage increases, most counties would receive higher low-wage commuting and have fewer low-wage residents. As minimum wage increases are larger, there are higher low-wage commuting reductions driven by employment relocation.