Association for Public Policy Analysis & Management

This paper studies the effect of the minimum wage on community college enrollment using variation in state minimum wage policy across state boundaries. To address spatial correlation in local labor market conditions, schools on either side of state borders are paired based on proximity. Comparing all cross-border school pairs with a minimum wage differential in the Integrated Postsecondary Education Data System, the paper finds a substantial reduction in enrollment at community colleges facing a higher minimum wage. The empirical analysis suggests that the enrollment decreases by between 4.8 and 5.4 percent at a community college subject to a 10 percent increase in minimum wage relative to the enrollment at a college in a neighboring state without a change in minimum wage. Subsample analysis by enrollment intensity shows a significant reduction in enrollment among part-time, but not full-time, students suggesting that minimum wage primarily affects the students at the margin between work and postsecondary education.

This paper makes several contributions to the literature. First, it expands the literature on community college enrollment patterns using a labor market relevant policy as a source of variation. As a state-level public policy, minimum wage is less likely to be correlated with other local labor market conditions that may also determine the enrollment patterns at community colleges. Second, the paper extends the literature on minimum wage’s role in educational attainment. Previous literature focused on the school attachment of high school students (Chaplin, Turner, and Pape, 2003), teenagers (Neumark and Wascher, 1995a, 1995b, and 2003), or did not make an effort to differentiate the level of education (Baker, 2005) whereas this paper examines enrollment responses in higher education. Finally, the paper utilizes the geographic discontinuity in implementation of minimum wage policy to generate credible comparison groups. This method ensures that the analysis is robust to confounding localized shocks. While similar strategies have been used in other settings, this paper brings the strategy to a new setting where time-varying location-specific characteristics may be important determinant of the enrollment.