Minimum Wage Increases Decrease Student Enrollments

Students who are least likely to earn an education credential are the most likely to withdraw from their studies following a minimum wage hike. Increases to state minimum wages are associated with falling enrollment at local community colleges, according to a new study by Diane Whitmore Schanzenbach, Julia A. Turner, and Sarah Turner. In Raising State Minimum Wages, Lowering Community College Enrollment (NBER Working Paper 31540), the researchers found that increases in state-level minimum wages were followed by enrollment reductions of just over 4 percent at two-year institutions in the following year. The reduced enrollment rate held steady for four years following the wage increase. The change in enrollment was not sensitive to the size of the wage increases, which were broadly organized into hikes of 6 percent, 8 percent, and 10 percent or more. Minimum wage increases had no effect on enrollment rates at four-year institutions. The researchers broke down their findings into subgroups by sex, race, and between full- and part-time students. They found no statistically significant differences in changing enrollment rates between men and women or across different racial groups at either two-year or four-year institutions. They did find a difference between full-time and part-time students, with part-time enrollees at two-year institutions seeing the largest dip in enrollment — 6 percent — in the year following a minimum wage increase. When assessing the effect of minimum wage increases on educational enrollment, the researchers used federal Integrated Postsecondary Education Data System data on student enrollment by type of institution, full- or part-time status, and student demographics for the period 1986–2019; local and regional demographics data from the American Community Survey and the Current Community Population Survey; and unemployment data from the Bureau of Labor Statistics. They estimated the effect of each minimum wage increase by comparing enrollment data in the two years before and the four years after the increase to enrollment data from all other states. The researchers also looked at the effects of minimum wage increases on the attainment of a certificate or a degree. They did not find any changes that were statistically different from zero. The researchers did find that in the year following a minimum wage increase, 5.3 percent fewer people registered for the General Educational Development exam, an alternative credential to the secondary school diploma, and 3.6 percent fewer passed it. The researchers concluded that increasing the minimum wage significantly affects enrollment decisions for the subset of students enrolled part-time at two-year institutions. They find that rising minimum wages do not affect degree attainment for any subgroup of students, which suggests that the students most likely to stop their studies in response to rising minimum wages are those with the longest road ahead in terms of money, time, and effort required before they gain an educational credential that could meaningfully affect their income potential. — Emma Salomon