Homelessness Lowers Wages

Homelessness and housing loss can weaken workers’ leverage in the labor market by making it harder to quit, move, or hold out for better pay. (nber.org) That mechanism starts with how wage bargaining works in practice: workers usually get higher pay when they can leave for another job, and National Bureau of Economic Research economists say many employers have room to set wages because only a minority of workers would leave after a 10% pay cut. (nber.org) Housing instability cuts directly into that outside option. A 2016 study by Matthew Desmond and Carl Gershenson found low-income renters who went through a forced move were 11 to 22 percentage points more likely to be laid off than otherwise similar workers. (jstor.org) New national research also shows homelessness is tied to very low and unstable incomes, not simply detachment from work. A 2024 National Bureau of Economic Research paper said people experience homelessness “because they are very poor despite being connected to the labor market and safety net.” (nber.org) The scale of the problem has grown as rents and housing costs outpaced many paychecks. The Department of Housing and Urban Development counted 771,480 people experiencing homelessness in the United States during the point-in-time count in the last 10 days of January 2024, the highest level on record. (huduser.gov) Low pay is part of that backdrop. The federal minimum wage is still $7.25 an hour, unchanged since July 24, 2009, under the Fair Labor Standards Act. (dol.gov) Even among people who stay attached to work, poverty remains common. The Bureau of Labor Statistics said 6.1 million people were “working poor” in 2023, meaning they spent at least 27 weeks working or looking for work and still lived below the poverty line. (bls.gov) Economists have recent evidence that wages rise faster when workers can actually move. A 2023 National Bureau of Economic Research paper found post-pandemic wage gains for young non-college workers were concentrated among people who changed employers, as tighter labor markets reduced employer power in low-wage work. (nber.org) Housing can block that kind of mobility before a worker ever reaches homelessness. The Urban Institute said employment does not automatically end homelessness, and people without stable housing face practical barriers to getting and keeping jobs, including transportation, storage, hygiene, and documentation problems. (urban.org) The counterargument is that wages mainly reflect skills and productivity, not housing status. But the labor-market evidence cited by National Bureau of Economic Research researchers says firms often have wage-setting power, which means a worker’s ability to walk away still shapes pay. (nber.org) That leaves the online claim resting on a narrower point than it first appears: homelessness does not set all low wages, but housing instability can make low-wage workers easier to underpay by shrinking the choices they can realistically take. (jstor.org)