State Minimum Wage Increases and Young Adult Household Formation: Evidence from Staggered Adoption

Abstract

Do state minimum wage increases affect young adults' ability to form independent households? I exploit staggered adoption of state minimum wages above the federal floor of \$7.25 per hour using a panel of 51 U.S.\ jurisdictions over 2015–2022 (excluding 2020, when the ACS one-year estimates were not released due to COVID-19). Applying the heterogeneity-robust difference-in-differences estimator, I define treatment as the first year a state's effective minimum wage exceeds the federal level by \$1.00 or more, yielding 31 treated states and 20 never-treated controls; of these, 16 states (cohorts 2016–2021) contribute to the CS-DiD ATT, as earlier cohorts are "always-treated" within the panel. Census Bureau American Community Survey data on living arrangements of 18–34 year-olds (Table B09021, age-group-specific cells B09021\_008E–014E) reveal that the overall average treatment effect on the treated for parental co-residence is $-0.540$ percentage points (SE $= 0.446$), statistically indistinguishable from zero. This null result is robust across alternative treatment thresholds, control groups (never-treated, not-yet-treated), estimators (TWFE, Sun–Abraham event study), exclusion of pandemic-era observations, and alternative outcomes. The findings suggest that minimum wage increases at observed magnitudes do not produce detectable shifts in aggregate household formation patterns among young adults, likely because wage gains are modest relative to housing costs and are diluted across the broad 18–34 population. Effects on directly exposed subpopulations cannot be ruled out.