DC’s $15 Minimum Wage: The Commuter Effect

Last week, we presented an overview of the effects of DC’s $15 minimum wage (full paper). Part two of our analysis focuses on “The Commuter Effect”. DC is surrounded by higher population jurisdictions that have increasingly lower minimum wages when compared to DC. This incentivizes more nearby Virginia and Maryland residents to compete for employment in DC. The result of this competition will force some DC residents who previously would have been able to find jobs in DC to have to look elsewhere.

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VA: Fairfax County, Arlington County, Alexandria   |   MD: Prince George’s County, Montgomery County

As the above chart shows, DC residents make up half of those working in DC and earning $12.50/hour or less. They make up a much smaller percent of those working outside DC. As DC’s minimum wage continues to increase to $15/hour, the group working outside DC will have greater and greater incentive to find work in DC. This will change the proportion of those “Working in DC” to look more like the group that is currently “Working Outside DC,” and that means proportionally fewer DC residents.

Job Losses

The commuter effect is the main reason that DC residents will lose 82% of all jobs lost in DC due to the minimum wage increase. Our model predicts by the year 2026, 2,489 total jobs will be lost, with 2,046 of those jobs previously being held by DC residents. Without the commuter effect, our model still estimates that there would be job losses as businesses and consumers react to changes in prices due to the minimum wage increase, but the commuter effect concentrates the losses on DC residents.

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What exactly is this data?

American Community Survey data was used to show where people live and work in the DC area. For a similar take on this data, see our previous post on DC workers and where they come from.

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