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As another ex-poor person: some of this is OK and some of it doesn't really ring true. E.g. > That’s the drop-off you experience at the lower price levels - t

As another ex-poor person: some of this is OK and some of it doesn't really ring true. E.g. > That’s the drop-off you experience at the lower price levels - there’s nothing between “This is a tiny but acceptable apartment” and “Slum apartments in stab-ville”. I don't think this is true, and why would it be? Unless you're in an area where the housing market is cliffed for some legislative or regulatory reason. But most places, no, I've not seen this. You might have to put effort in to find nicer places on a budget, research areas, etc. but isn't that true of any purchase? It's true that when you're poor you never get close to those naive 'this is how much of your income to spend on rent' suggestions, but there are places that cover the whole spectrum. > Whichever you choose, a person of less-than-intermediate income has to be prepared to stick with the rental long-term, should things not go well. This is because apartments at both of these levels quite accurately assume that you can’t afford a lawyer - while it’s normal to put down a month or two worth of rent as a security deposit, it’s much less normal to get it back; the apartment complex has no reason to give back thousands of dollars they can simply keep. This means every time you move, you pay something like a third to a month’s wages for the privilege. Since breaking a lease often means you lose your privilege to live anywhere non-hellish, this means if you don’t have cash reserves (more on these later*) at the exact right time of year, you might end up in the same place for another full year whether you like it or not. You stick with a rental longer term because of overheads, yeah, but I wouldn't go into a rental contract expecting with certainty to lose 100% of my deposit. Rather what happens is you get good at doing minor legal research and writing terse emails about it. Maybe many are scummy by default, but most roll when they see you've got even a little knowledge about what you're entitled to. That's a valuable skill for life in general, so it's something you should be learning to do regardless. > a person’s pay is determined by how rare their skills are and how much demand there is for those skills. The value of their work doesn’t factor in as much What's the value of a person's work that isn't just determined by the first part? What does the author think drives demand, if not the prospective value you provide to the various companies in the labor market?

simiones 6y ago
> > a person’s pay is determined by how rare their skills are and how much demand there is for those skills. The value of their work doesn’t factor in as much > What's the value of a person's work that isn't just determined by the first part? What does the author think drives demand, if not the prospective value you provide to the various companies in the labor market? The value of your work is "how much money would the company lose if no one did the exact job I am doing". This generally has 0 correlation to your wage, because in general a company will think in terms of "how much money would the company lose if anyone else did the job this employee is doing", which is a very different question. This is how it happens that many absolutely essential jobs, without which society would simply stop functioning, are also among the lowest payed. Probably one of the best examples is nurses, but also warehouse workers, transport people, construction workers, farm hands.
- carmen_sandiego 6y ago
  I assume that when he talks about 'rarity' of skills he's talking about supply. Almost anyone can be a farm hand; supply is huge and individual workers are fungible. So wages are low. "how much money would the company lose if no one did the exact job I am doing" seems a bit of a moot point when it's not even close to being the case that no-one would do the job in question. _Expected_ value then approaches price paid as you weight in the probability involved.
  - simiones 6y ago
    Well, this is exactly what he explains as the reality, and I agree that this is how the job market works. However, that's not to say that it is a good state of affairs, or that it is the only way things could work. In fact, the purpose of workers' unions is exactly to stop this kind of thinking, and it seems like this may once again start spreading a bit, given the recent movements in Amazon and other places. The problem with this is that the company is using its leverage over workers to treat them as a commodity. If workers had more leverage, they could refuse the job unless they were paid a fair wage (the value of their work as I defined it above), but as it is, they are forced to compete with other workers since not working would see them and their families homeless and maybe even dying of hunger. With the current state of affairs, the company owners end up extracting much more value from their workers as profit, often by deliberately fixing the wage market (as we saw with the illegal SV "no poaching" deal for tech workers), or at least by seeking to attain geographical monopoly status in it.
    - carmen_sandiego 6y ago
      I'm not sure it's ever going to be the case at the very bottom of the skill continuum that workers won't be seen as a commodity given just how replaceable they are to the company. For some jobs you could have your whole workforce strike, fire them, and replace them the next day with a minor blip in productivity. The only thing that stops that is regulation or wider organization than just that particular worker segment, neither of which seem forthcoming in the US, at least.
wizzwizz4 6y ago
Value, not demand. A nurse who helps stop 50 people from dying each week is doing very valuable work, but a talented lawyer helping to defeat valid class-action lawsuits (negative value work) is probably paid more.
- carmen_sandiego 6y ago
  Healthcare is kind of a special case though, in that it's not really a free market (whether you think it should be or not). So the value of what medical professionals do isn't really signalled through. The lawyer has high value to the company that pays them, so they probably meet the first part exactly: rare skills in high demand.
  - wizzwizz4 6y ago
    Okay, but now consider other monopsonies. There are plenty. What most people get paid is almost entirely decoupled from the net value they create, and oftentimes it's only tangentially related to the value they give to their employer.
    - carmen_sandiego 6y ago
      The labor market isn't fully efficient but I don't believe it's "almost entirely decoupled" from the value employees provide. If you provide with certainty $100k/y of value and your employer pays you $30k/y, there'd be no shortage of entities willing to bid up that price. Who wouldn't take profit within their risk tolerance? What mechanism do you think would prevent this from happening?
      - wizzwizz4 6y ago
        • Barriers-to-entry – e.g., skills, ethical injunctions, psychological torment, qualifications… • Job security – some people are just too poor to go on the job market for a few weeks or months, meaning they don't have much leverage to get their employer to increase their pay… • Perverse incentives – some jobs are all about destroying value, e.g. loan sharks, most of the advertising industry… http://news.bbc.co.uk/1/hi/8410489.stm http://news.bbc.co.uk/1/hi/8410489.stm (2009) has a short list. • Monopsony – what if your employer is the only one currently in a position to make that much from you (or all the competitors have already filled their positions)? I could go on, but I'm only scratching the surface of my surface-level knowledge.
ivanbakel 6y ago
>What's the value of a person's work that isn't just determined by the first part? The value of the work done, either in a physical sense (because it produces something of value) or in a societal sense (because it involves doing something of value). If you're the best hole-digger in the world, and people are constantly trying to hire you to dig holes so that they can fill them in, then you would be highly paid - but would your work be "valuable"? Probably very few people are true free-market believers when it comes to the idea of fair pay.
- chii 6y ago
  > but would your work be "valuable"? yes, if somebody else would be willing to swap their hard earned "value" for it. The problem is when people making decisions to swap is not swapping their own personal "value" they accumulated themselves, but someone else's (usually the tax payers').
- jonathanstrange 6y ago
  IMHO the problem is deeper than that. Economists often wrongly and silently presume that free market equilibria lead to desirable states of society but there is nothing in their theories that would warrant this. It works for simple trades (bargaining) but once you're at the level of institutions there is no need for a match between institutional needs and the preferences and desires of individuals in a society. For instance, to build a certain product a company needs a certain distribution of different types of work. These needs of the larger institution need not match individuals' life choices at all. Some jobs can even be so desirable that workers are willing to lose money in the long run (that's e.g. how Amazon benefits from selling the works of self-publishers who often overall lose money). Consequently, since people need to make a living, even in a fully functioning free job market there can be a substantially large number of people who are pressed into choices that make their lives miserable.
- wizzwizz4 6y ago
  > If you're the best hole-digger in the world, and people are constantly trying to hire you to dig holes so that they can fill them in, then you would be highly paid - but would your work be "valuable"? If people get transcendent joy out of filling in holes, or the filling-in of holes otherwise matters to them, then this is valuable. In a real-world scenario, it's a bullshit job: https://www.strike.coop/bullshit-jobs/ https://www.strike.coop/bullshit-jobs/
tonyedgecombe 6y ago
I don't think this is true, and why would it be? Unless you're in an area where the housing market is cliffed for some legislative or regulatory reason. I have a friend who works in real estate and he tells me people in difficult circumstances pay a premium because of the risk of default and damage. The landlord needs more margin to cover those extra risks. He also told me you could never make money at the bottom end of the market if you have middle class sensibilities. It's pretty ruthless at the bottom.
- carmen_sandiego 6y ago
  Right, but there are presumably people at all levels of risk, not just risky people who pay a premium vs non-risky people who don't. Reduced variance is good for landlords too, so there's definitely an incentive to accurately predict and make granular the risk profile/credit check/etc.
leoedin 6y ago
I've seen this effect a few times with housing. When viewing either apartments or shared rooms, not being discerning enough at the advert stage has resulted in viewing some absolutely terrible places - damp, poorly heated, unmaintained, and the sense from interacting with the landlord that their MO is firmly "slumlord". The really surprising thing is that the rent demanded for these places is often not much less than the rent for a much nicer space in the same area of the city - maybe £50-£100/month. I think when supply and demand meets minimum wage you get an incredibly non-linear effect in bang for buck. I'm sure there are exceptions (the property market definitely has a negative survivorship bias where the nice cheap properties are never on the market for very long while the terrible ones are).
- TheOtherHobbes 6y ago
  Rental housing is a very sketchy business full of very sketchy people. The fewer scruples a landlord has, the easier the money.
notauser 6y ago
There is definitely non-linear pricing in the London housing market as one example. When I was last looking - Studio apartments and one bed room apartments rented for similar amounts, and so did two beds and three beds. But the price jump from one bed to two bed was much larger than any of the other jumps. You can speculate on many reasons why this might be the case (smallest size apartment for a family in the city, smallest size you can split with a friend, smallest size with space for an office). There are exceptions and I'm sure that more research time could help you find them. But one of the points made convincingly in the artle is that if you are poor you don't have a lot of energy, time or gas-money to do that kind of research.
- carmen_sandiego 6y ago
  I mean, we can talk about price jumps between bedroom counts if you want but I'm not sure it's very relevant to the article, which is saying there's only "stabbyville" and "safe" places given other fixed requirements. If you need a studio in London, they exist all through the price spectrum, area spectrum, and other dimensions. I suspect the 'jump' you see from one bed to two is that, on average, two beds are in nicer areas, or they are houses rather than flats, freehold rather than lease, etc. Bedroom count is correlated with other features that also increase the average price. But that doesn't mean there aren't two beds in cheaper areas too. The typical tradeoff in London is price vs proximity to work/transport. For most people. Safety comes in at the very bottom end, but still you can live far out and commute. I'm not saying that's a pleasant experience, or that being poor is a pleasant experience in general, but the tradeoff and choice exists. If you have a job in central London that you'd commute to though, fact is you are already probably well off compared to most of the country. It's a bit like how student debt mostly affects the middle class. Same with expensive season tickets for the train.
- notahacker 6y ago
  > But the price jump from one bed to two bed was much larger than any of the other jumps. That price jump isn't particularly surprising given London's one bed flats are competing against a vast number of individual rooms in shared properties rented out (which is regarded as a normal living arrangement in London, including for professionals, somewhat older people and to an extent couples). Obviously people who need an extra bedroom aren't really in that market, and the second bedroom is also easily [sub]let out separately.
JanneVee 6y ago
>> That’s the drop-off you experience at the lower price levels - there’s nothing between “This is a tiny but acceptable apartment” and “Slum apartments in stab-ville”. >I don't think this is true, and why would it be? Unless you're in an area where the housing market is cliffed for some legislative or regulatory reason. But most places, no, I've not seen this. You might have to put effort in to find nicer places on a budget, research areas, etc. but isn't that true of any purchase? The thing that I've noticed is that yes the sweet spot exists but the supply is always more limited. You have higher availability on living because it is so expensive that not everyone can afford it(or think it is worth it). And the cheap in not so good areas (not necessarily dangerous but gives e.g. longer commutes and has less services and so on) have a higher supply because of that. The sweet spot in good location and a good price is going to have all houses and/or apartments taken. Then the surprise happens, since supply is limited at this sweet spot the prices tend to rise so you get that cliff mentioned in the article.
burlesona 6y ago
I’ve lived in small towns in Illinois and Texas, mid-sized in North Carolina, and big cities in Texas and California. That’s enough to know that housing markets are wildly divergent across the US, and really can’t be generalized. The author seems to be describing how things are in metro Phoenix. Having not lived there, I’d assume it’s as described. I will say that my experience has been that there’s a paradox: it should be much easier to get by as a poor person in small towns as everything costs a lot less, but paradoxically there’s even less work to do so it’s hard to even come up with the low local costs. In the end, poverty is always relative to the local market.

simiones 6y ago

> > a person’s pay is determined by how rare their skills are and how much demand there is for those skills. The value of their work doesn’t factor in as much > What's the value of a person's work that isn't just determined by the first part? What does the author think drives demand, if not the prospective value you provide to the various companies in the labor market? The value of your work is "how much money would the company lose if no one did the exact job I am doing". This generally has 0 correlation to your wage, because in general a company will think in terms of "how much money would the company lose if anyone else did the job this employee is doing", which is a very different question. This is how it happens that many absolutely essential jobs, without which society would simply stop functioning, are also among the lowest payed. Probably one of the best examples is nurses, but also warehouse workers, transport people, construction workers, farm hands.

carmen_sandiego 6y ago
I assume that when he talks about 'rarity' of skills he's talking about supply. Almost anyone can be a farm hand; supply is huge and individual workers are fungible. So wages are low. "how much money would the company lose if no one did the exact job I am doing" seems a bit of a moot point when it's not even close to being the case that no-one would do the job in question. _Expected_ value then approaches price paid as you weight in the probability involved.
- simiones 6y ago
  Well, this is exactly what he explains as the reality, and I agree that this is how the job market works. However, that's not to say that it is a good state of affairs, or that it is the only way things could work. In fact, the purpose of workers' unions is exactly to stop this kind of thinking, and it seems like this may once again start spreading a bit, given the recent movements in Amazon and other places. The problem with this is that the company is using its leverage over workers to treat them as a commodity. If workers had more leverage, they could refuse the job unless they were paid a fair wage (the value of their work as I defined it above), but as it is, they are forced to compete with other workers since not working would see them and their families homeless and maybe even dying of hunger. With the current state of affairs, the company owners end up extracting much more value from their workers as profit, often by deliberately fixing the wage market (as we saw with the illegal SV "no poaching" deal for tech workers), or at least by seeking to attain geographical monopoly status in it.
  - carmen_sandiego 6y ago
    I'm not sure it's ever going to be the case at the very bottom of the skill continuum that workers won't be seen as a commodity given just how replaceable they are to the company. For some jobs you could have your whole workforce strike, fire them, and replace them the next day with a minor blip in productivity. The only thing that stops that is regulation or wider organization than just that particular worker segment, neither of which seem forthcoming in the US, at least.

wizzwizz4 6y ago

Value, not demand. A nurse who helps stop 50 people from dying each week is doing very valuable work, but a talented lawyer helping to defeat valid class-action lawsuits (negative value work) is probably paid more.

carmen_sandiego 6y ago
Healthcare is kind of a special case though, in that it's not really a free market (whether you think it should be or not). So the value of what medical professionals do isn't really signalled through. The lawyer has high value to the company that pays them, so they probably meet the first part exactly: rare skills in high demand.
- wizzwizz4 6y ago
  Okay, but now consider other monopsonies. There are plenty. What most people get paid is almost entirely decoupled from the net value they create, and oftentimes it's only tangentially related to the value they give to their employer.
  - carmen_sandiego 6y ago
    The labor market isn't fully efficient but I don't believe it's "almost entirely decoupled" from the value employees provide. If you provide with certainty $100k/y of value and your employer pays you $30k/y, there'd be no shortage of entities willing to bid up that price. Who wouldn't take profit within their risk tolerance? What mechanism do you think would prevent this from happening?
    - wizzwizz4 6y ago
      • Barriers-to-entry – e.g., skills, ethical injunctions, psychological torment, qualifications… • Job security – some people are just too poor to go on the job market for a few weeks or months, meaning they don't have much leverage to get their employer to increase their pay… • Perverse incentives – some jobs are all about destroying value, e.g. loan sharks, most of the advertising industry… http://news.bbc.co.uk/1/hi/8410489.stm http://news.bbc.co.uk/1/hi/8410489.stm (2009) has a short list. • Monopsony – what if your employer is the only one currently in a position to make that much from you (or all the competitors have already filled their positions)? I could go on, but I'm only scratching the surface of my surface-level knowledge.

ivanbakel 6y ago

>What's the value of a person's work that isn't just determined by the first part? The value of the work done, either in a physical sense (because it produces something of value) or in a societal sense (because it involves doing something of value). If you're the best hole-digger in the world, and people are constantly trying to hire you to dig holes so that they can fill them in, then you would be highly paid - but would your work be "valuable"? Probably very few people are true free-market believers when it comes to the idea of fair pay.

chii 6y ago
> but would your work be "valuable"? yes, if somebody else would be willing to swap their hard earned "value" for it. The problem is when people making decisions to swap is not swapping their own personal "value" they accumulated themselves, but someone else's (usually the tax payers').
jonathanstrange 6y ago
IMHO the problem is deeper than that. Economists often wrongly and silently presume that free market equilibria lead to desirable states of society but there is nothing in their theories that would warrant this. It works for simple trades (bargaining) but once you're at the level of institutions there is no need for a match between institutional needs and the preferences and desires of individuals in a society. For instance, to build a certain product a company needs a certain distribution of different types of work. These needs of the larger institution need not match individuals' life choices at all. Some jobs can even be so desirable that workers are willing to lose money in the long run (that's e.g. how Amazon benefits from selling the works of self-publishers who often overall lose money). Consequently, since people need to make a living, even in a fully functioning free job market there can be a substantially large number of people who are pressed into choices that make their lives miserable.
wizzwizz4 6y ago
> If you're the best hole-digger in the world, and people are constantly trying to hire you to dig holes so that they can fill them in, then you would be highly paid - but would your work be "valuable"? If people get transcendent joy out of filling in holes, or the filling-in of holes otherwise matters to them, then this is valuable. In a real-world scenario, it's a bullshit job: https://www.strike.coop/bullshit-jobs/ https://www.strike.coop/bullshit-jobs/

tonyedgecombe 6y ago

I don't think this is true, and why would it be? Unless you're in an area where the housing market is cliffed for some legislative or regulatory reason. I have a friend who works in real estate and he tells me people in difficult circumstances pay a premium because of the risk of default and damage. The landlord needs more margin to cover those extra risks. He also told me you could never make money at the bottom end of the market if you have middle class sensibilities. It's pretty ruthless at the bottom.

carmen_sandiego 6y ago
Right, but there are presumably people at all levels of risk, not just risky people who pay a premium vs non-risky people who don't. Reduced variance is good for landlords too, so there's definitely an incentive to accurately predict and make granular the risk profile/credit check/etc.

leoedin 6y ago

I've seen this effect a few times with housing. When viewing either apartments or shared rooms, not being discerning enough at the advert stage has resulted in viewing some absolutely terrible places - damp, poorly heated, unmaintained, and the sense from interacting with the landlord that their MO is firmly "slumlord". The really surprising thing is that the rent demanded for these places is often not much less than the rent for a much nicer space in the same area of the city - maybe £50-£100/month. I think when supply and demand meets minimum wage you get an incredibly non-linear effect in bang for buck. I'm sure there are exceptions (the property market definitely has a negative survivorship bias where the nice cheap properties are never on the market for very long while the terrible ones are).

TheOtherHobbes 6y ago
Rental housing is a very sketchy business full of very sketchy people. The fewer scruples a landlord has, the easier the money.

notauser 6y ago

There is definitely non-linear pricing in the London housing market as one example. When I was last looking - Studio apartments and one bed room apartments rented for similar amounts, and so did two beds and three beds. But the price jump from one bed to two bed was much larger than any of the other jumps. You can speculate on many reasons why this might be the case (smallest size apartment for a family in the city, smallest size you can split with a friend, smallest size with space for an office). There are exceptions and I'm sure that more research time could help you find them. But one of the points made convincingly in the artle is that if you are poor you don't have a lot of energy, time or gas-money to do that kind of research.

carmen_sandiego 6y ago
I mean, we can talk about price jumps between bedroom counts if you want but I'm not sure it's very relevant to the article, which is saying there's only "stabbyville" and "safe" places given other fixed requirements. If you need a studio in London, they exist all through the price spectrum, area spectrum, and other dimensions. I suspect the 'jump' you see from one bed to two is that, on average, two beds are in nicer areas, or they are houses rather than flats, freehold rather than lease, etc. Bedroom count is correlated with other features that also increase the average price. But that doesn't mean there aren't two beds in cheaper areas too. The typical tradeoff in London is price vs proximity to work/transport. For most people. Safety comes in at the very bottom end, but still you can live far out and commute. I'm not saying that's a pleasant experience, or that being poor is a pleasant experience in general, but the tradeoff and choice exists. If you have a job in central London that you'd commute to though, fact is you are already probably well off compared to most of the country. It's a bit like how student debt mostly affects the middle class. Same with expensive season tickets for the train.
notahacker 6y ago
> But the price jump from one bed to two bed was much larger than any of the other jumps. That price jump isn't particularly surprising given London's one bed flats are competing against a vast number of individual rooms in shared properties rented out (which is regarded as a normal living arrangement in London, including for professionals, somewhat older people and to an extent couples). Obviously people who need an extra bedroom aren't really in that market, and the second bedroom is also easily [sub]let out separately.

JanneVee 6y ago

>> That’s the drop-off you experience at the lower price levels - there’s nothing between “This is a tiny but acceptable apartment” and “Slum apartments in stab-ville”. >I don't think this is true, and why would it be? Unless you're in an area where the housing market is cliffed for some legislative or regulatory reason. But most places, no, I've not seen this. You might have to put effort in to find nicer places on a budget, research areas, etc. but isn't that true of any purchase? The thing that I've noticed is that yes the sweet spot exists but the supply is always more limited. You have higher availability on living because it is so expensive that not everyone can afford it(or think it is worth it). And the cheap in not so good areas (not necessarily dangerous but gives e.g. longer commutes and has less services and so on) have a higher supply because of that. The sweet spot in good location and a good price is going to have all houses and/or apartments taken. Then the surprise happens, since supply is limited at this sweet spot the prices tend to rise so you get that cliff mentioned in the article.

burlesona 6y ago

I’ve lived in small towns in Illinois and Texas, mid-sized in North Carolina, and big cities in Texas and California. That’s enough to know that housing markets are wildly divergent across the US, and really can’t be generalized. The author seems to be describing how things are in metro Phoenix. Having not lived there, I’d assume it’s as described. I will say that my experience has been that there’s a paradox: it should be much easier to get by as a poor person in small towns as everything costs a lot less, but paradoxically there’s even less work to do so it’s hard to even come up with the low local costs. In the end, poverty is always relative to the local market.