Gabrielle Tammaro '22, advised by Prof. Daniel Schwab (Economics & Accounting)

Abstract

In 2018, consumer debtors reported total liabilities of $127 billion (US Courts). This is about approximately $169,000 of debt per filing household. While filing for bankruptcy allows for a great amount of debt to be forgiven, it comes at the price of financial privacy. Thus, many have tried implementing policies to reduce bankruptcy. Policies that aim to reduce bankruptcy filings without reducing poverty are questionable since less filers does not necessarily mean less debtors. Therefore, policies that aim to reduce bankruptcy filings by reducing poverty are good. Raising the minimum wage could decrease consumer bankruptcy filings thanks to more disposable income giving workers more access to better loan programs (Dettling and Hsu 2017). We find that raising the minimum wage decreases the number of consumer bankruptcy filings. We predict that a 1% increase in minimum wage reduces the number of consumer bankruptcy filings by .8 - 1.3% We also find evidence that suggests that this is because raising the minimum wage reduces financial hardship for low income workers.

Poster Presentation